How New U.S. Tariffs Are Impacting Construction—and What to Do About It

The US construction industry, long reliant on globally sourcing steel, lumber, and other materials, is now facing a new wave of economic turbulence—tariff chaos threatening to destabilize projects across the board. 

Since coming into power, President Trump has announced a series of tariffs on imported goods that have completely shaken up the construction industry. Take steel, for example: the U.S. imports 26% of its iron and steel, nearly half of it from Canada and Mexico. In just the first quarter of 2025, steel prices jumped 16% quarter-over-quarter following new tariff measures.

And this is likely just the start. Contractors face serious challenges around costs, supply chains, and contract stability with global trade tensions escalating and retaliation from key partners piling up.

So, how can you protect your construction projects from this growing tariff chaos? Let’s break it down.

How New U.S. Tariffs Are Impacting Construction Material Costs

Since early March, a flood of tariff changes has sent shockwaves through the global construction supply chain. In short, building stuff is going to get a lot more expensive. 

Here’s what’s unfolding: 

China: Earlier this year, the U.S. imposed a sweeping 10% tariff on nearly all Chinese imports, escalating to 145% by April. In retaliation, China levied up to 125% tariffs on U.S. exports, including crude oil, coal, LNG, and agricultural machinery, many of which are critical to energy and construction-related infrastructure.

However, as of May 2025, both countries agreed to a 90-day truce. Tariffs were temporarily reduced as part of ongoing negotiations:

• U.S. tariffs on Chinese imports dropped from 145% to 30%
• Chinese tariffs on U.S. goods were cut from 125% to 10%

While this has provided temporary relief, the situation remains fluid, with the risk of tariff hikes returning if talks collapse.

Mexico and Canada: The U.S. has enacted 25% tariffs on all imports, exempting USMCA-covered goods until April 2, after which they also face the same rate. In response, Canada imposed 25% tariffs on $29.8 billion worth of U.S. imports, including steel, aluminum, and various manufactured goods.

Steel, Aluminum, Copper, and Lumber: A new 25% tariff on all steel and aluminum imports is now in effect. Copper and lumber are under consideration for similar tariffs, adding further uncertainty to construction material costs. 

European Union: A planned 25% U.S. tariff on all EU goods is in motion, with the EU responding with €100 billion on US imports, including aircraft, vehicles, agricultural products, and more. These measures are contingent on the outcome of ongoing trade negotiations. ‍

The unpredictable nature of these tariffs directly threatens project cost, timelines, and long-term contract viability.

New Tariffs and Market Volatility Affecting Construction Contracts

As if finalizing a construction project wasn’t challenging enough, the evolving tariff policies add another layer of risks to construction contracts, particularly those drafted without flexible provisions to absorb material cost increases or delays due to supply chain disruptions. 

These tariff changes aren’t just headlines; they’re hitting job sites across the United States. Here’s how they could affect your work:

Skyrocketing Material Costs

The cost of essential materials—steel, aluminum, copper, and lumber—has spiked, leading to a surge in project estimates.

Supply Chain Slowdowns 

Tariffs are disrupting sourcing pipelines, especially for energy products, agricultural machinery, and building materials.

Legal and Financial Exposure

Contracts that don’t contain escalation clauses or price adjustment mechanisms could leave contractors liable for significant cost overruns.

How to Protect Your Construction Contracts 

Construction firms must proactively revise and fortify their contract strategies to navigate these new tariffs. Here are key protections and best practices to adopt:

Add Price Escalation Clauses 

These clauses in construction contracts allow you to adjust contract prices if the cost of materials exceeds a certain threshold due to external factors like tariffs. They protect both the contractor and client from absorbing the full brunt of economic shifts.

Include Supply Chain Disruption Provisions

Incorporate provisions to address potential delays and cost increases caused by supply chain disruptions related to tariffs.

Incorporate Change-in-Law Clauses

These clauses allow the parties to renegotiate or terminate the contract if new laws (including tariffs) alter the contract’s basis.

Revisit Procurement Strategies

Explore relationships with domestic suppliers or those less affected by current tariffs to reduce dependency on high-tariff markets.

Preparing for Ongoing Tariff Uncertainty and Rising Construction Costs in 2025

Trade tensions are showing no signs of cooling. Experts predict continued turbulence in global trade well into 2025, especially as geopolitical tensions and protectionist policies remain prominent. 

For people in construction, this means the old way of working might not cut it anymore. Builders who want to do well amid this tariff chaos must invest in making contracts that follow rules and protect them from uncertainty. Now is the time to meet with your legal, buying, and project teams to check if your contracts are ready. In this new normal for the construction industry, you fall behind if you don’t prepare well beforehand.