Construction leaders are no strangers to rising costs and shifting timelines, but the latest wave of global tariffs is throwing another wrench into the works. When material prices spike unexpectedly, it’s not just a finance issue, it’s an operations issue. Procurement, estimating, contracting, and job costing all feel the impact.
And if those areas aren’t aligned and responsive, profit fade can creep in fast. Now’s the time to pressure test your processes, shore up your contracts, and double down on forecasting discipline. Let’s break down what’s changing and how your business can roll with the punches.
So, what is happening with the tariffs?
In recent days, the U.S. government has announced increased tariffs on a variety of goods imported from countries like China, Mexico, Vietnam, and Canada. These changes are intended to protect domestic manufacturing. Contracts are in continuous negotiations, but here are the current rates as of April 7th, 2025:
%
China
Steel and aluminum tariffs have jumped to 25%, with total effective trade rates reaching up to 125%.
%
Vietnam
Fasteners, nails, and certain structural steels are now facing tariffs as high as 46%.
%
Mexico
Select concrete materials and electrical components may be taxed up to 25%.
%
Canada
Tariffs on framing lumber have been lifted, while energy resource tariffs have dropped to 10%.
These materials are foundational to both commercial and industrial projects. The implications? Contracts signed just a few months ago could already be at risk of profit fade if operating strategies haven’t kept pace.
What Can You Control? A Lot More Than You Think.
While rising tariffs can feel like a cause for concern, this is also a time to spot opportunities and strengthen your business strategy. There’s not enough knowledge on the direct impact, and therefore, there’s no need to panic. With the right preparation and planning, you can protect your margins and position your company to push through this challenge.
1
Communicate with Customers
Communicate to customers the potential impact of the tariffs on their project costs and what your company will do to manage the changes.
2
Review and Update Contracts
Make sure future contracts include escalation clauses for materials. These clauses allow you to adjust pricing based on market volatility, which is especially helpful when material costs jump unexpectedly. Work to negotiate the current contracts you have and ensure that a clause is implemented in those that are upcoming.
3
Improve Procurement Strategy
Work with your purchasing teams to source domestically where feasible or lock in prices with suppliers before tariffs fully impact cost. Bulk purchasing or entering long-term agreements may offer stability.
4
Reforecast Job Costs Regularly
Update your Work-in-Progress (WIP) schedules with revised material costs as soon as new tariffs take effect. Early adjustments can prevent late surprises and help maintain bonding capacity.
5
Lean Into Preconstruction Planning
More than ever, preconstruction teams need to collaborate with estimators and finance to factor in tariff-related costs. This forward-thinking approach can mean the difference between a job that hits budget and one that bleeds margin.
Ensure that you accurately measure and report the timeframe in which your project wins transition to complete buyout on each job.
6
Use Tax Strategy to Offset Costs
Explore opportunities for bonus depreciation, R&D tax credits, or other incentives to help offset increased material costs. These tools can create breathing room in your overall tax strategy.
Tariffs aren’t something construction companies can control, but profit fade is. By proactively adjusting your contracts, cost tracking, procurement practices, and tax planning, you can turn a potential hit into a manageable risk. We’re here to help you keep your financial game strong, no matter what global markets throw your way.
