Thought Leaders: What to know about the anticipated impact of tariffs on the construction industry

The Trump administration has issued a flurry of Executive Orders in 2025 imposing tariffs on imports, which directly affect the construction industry and are anticipated to increase the cost of essential building materials such as steel, aluminum, lumber, lime, and gypsum (used for drywall), which are primarily imported from Canada and Mexico. Many project materials, including steel, are also sourced from China. These increased costs are typically passed on to the consumer. As a result, increased costs will either be borne by the contractor or passed on to the project owner. 

In addition, tariffs are expected to lead to project delays. With national disasters such as the recent California fires, supply chains are already experiencing disruptions. Tariffs may further disrupt already unstable supply chains—all of which is anticipated to delay construction projects. Due to cost increases and market uncertainty, projects that have not started yet or are early in the construction process may be cancelled or stopped. 

Construction contracts on existing projects may include terms and conditions that provide schedule and/or cost relief for contractors, including force majeure, material escalation, change-in-law, excusable delay, and cost reimbursement clauses. On federal projects, FAR 52.229-3 and Economic Price Adjustment clauses may also provide relief for contractors. Many states also have prompt payment statutes that ensure contractors receive timely payment for work performed, even when disputes arise over tariff-related cost increases.

On future projects, it is anticipated that contractual risk-shifting clauses that help mitigate the impact of tariffs will be the subject of intense negotiation, with contractors and project owners each looking to protect themselves from increased costs and delays resulting from tariffs. 

As tariff volatility continues, it will be important for contractors and project owners to stay up to date with political and legal developments and have a team ready to respond to changes as they arise so they can weather the volatility and economic impacts caused by new and increased tariffs. 

If you have questions about the impact of tariffs on your construction business or project, contact BHGR’s Construction Group today. 

This article is informational only. The presentation or use of this information does not in any manner constitute an attorney-client relationship between BHGR and the website user. While the information on this site concerns legal issues, it is not intended as legal advice and is not a substitute for particularized advice from your own legal counsel.