How contractors can plan for impact of steel, aluminum tariffs

by Christopher Brinckerhoff | 11 February 2025 12:00 pm

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Over the weekend, President Donald Trump said 25 percent tariffs would be imposed on all imported steel and aluminum, the Associated Press (AP) reported[2]. His comments follow previously announced 25 percent tariffs planned for imports from Canada and Mexico, which were postponed for one month after leaders from both countries pledged to increase security at U.S. borders, the AP reported[3]. Also, on Feb. 4, 10 percent tariffs on Chinese imports took effect.

Michael Bellaman, president and CEO at Associated Builders and Contractors (ABC)[4], says, “ABC was founded on the principles of fair and open competition, and when it comes to international trade, we recognize that some countries don’t play by the rules. President Trump has been transparent about his intent to use tariffs as a negotiating tool for critical American priorities, including fair trade, national security, and encouraging more use of American products. ABC members understand the context for the president’s actions and know how to plan for and deal with tariffs and other supply chain disruptions.

“ABC members rely on U.S. and global supply chains to build everything from power plants and airports to schools and hospitals and roads. We understand that the recent tariffs may affect choices for a variety of important materials and goods such as aluminum and steel, trucks, chips, and HVAC systems,” he adds.

In addition to imported goods, the cost of domestic goods could also rise as a consequence of the tariffs, Bellaman says.

“Contractors have strategies in place like locking in prices ahead of the tariffs, but the cost for construction services will rise, which will most likely lead to fewer construction projects. That’s the simple law of supply and demand. In fact, any new or increased tariffs can raise the price of materials produced domestically that compete with imports. The industry is already facing consistently high prices on construction inputs and commodities, which have increased 38.6 percent since February 2020.

“However, ABC members expect to see countervailing effects on the price of construction services from deregulation, streamlined permitting, and a renewed focus on entrepreneurship and workforce development, as we saw in the first Trump administration. Ultimately, America stands to benefit from the revenue raised by the tariffs, more domestic manufacturing capacity, and a continued commitment from the Trump administration to fair and open competition.”

To provide ongoing information to its members on the impacts of tariffs on the construction industry, Associated General Contractors of America (AGC) offers a Tariff Resource Center for Contractors page[5] on its website. Notably, AGC published a memo about trade policies and tariffs[6] in January, which is accessible on the page. The memo has general information about circumstances contractors may face concerning tariff increases and how they can manage them.

“Beyond cost increases, there are also risks of supply chain disruptions. Contractors may face short-term material shortages as suppliers adjust sourcing strategies. The AGC Tariff Memo to Contractors 2025 suggests that firms should lock in prices where possible, but for those without pricing protections in place, we could see procurement challenges that lead to project delays,” says Macrina Wilkins, senior research analyst at AGC

Another factor to consider concerning tariffs is contract structure, Wilkins says. “Many federal and federally-assisted construction projects are awarded on fixed-price contracts, meaning contractors will have limited ability to pass cost increases onto clients. The memo notes that while some federal contracts contain escalation clauses (like FAR 52.229-3), they may not cover tariffs imposed after bid submission. This could create financial strain, particularly for smaller contractors with tighter margins.

“Looking ahead, the uncertainty around trade policy is another challenge. If tariffs remain in place for an extended period, firms may delay new projects or reassess capital expenditures until there is more clarity on long-term pricing. In industries with thin profit margins like construction, this kind of uncertainty can slow down decision-making and investment.”

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