Redrawing the Supply Chain A look at the impact of new tariffs on the construction industry By Eric McManus CBIZ
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olicy changes introduced by the Trump administration stand to have a major impact on the construction industry. Tariffs of 25% on steel and aluminum imports are designed to encourage domestic production of key materials and reduce the domestic economy’s dependency on foreign providers. While it will take time for these tariffs to have their intended impact in terms of spurring domestic production, they will have the immediate effect of reshaping the industry landscape. In the short term, tariffs will radically change material costs, supply chains and procurement strategies, affect market demand, and reshape the dynamics of competition in the construction industry.
Higher material costs
Essential materials will likely get substantially more expensive, further compressing profit margins. As mentioned, steel and aluminum have been subject to 25% tariffs when the policy changes went into effect on March 12, 2025. The nature of the tariffs, as they stand, apply universally, regardless of the source of the imported material. However, the stated target of the tariffs is China, which the administration accuses of undercutting the competition by subsidizing the export of Chinese metals. Currently, most U.S. steel imports are sourced from Canada, Brazil and Mexico. Speaking of Canada and Mexico, we’ve already seen announced tariff timelines changing, following calls with leaders of those countries. It’s possible we’ll see similar delays in the implementation of future tariffs. That’s worth keeping in mind as a possibility, but conventional wisdom suggests that, while the timing may be hard to predict, these tariffs will continue. Construction business owners facing tariff-related uncertainty can prepare by minimizing the impact of more expensive materials. That means:
or quality (unless the contract has material price escalation features; if so, discuss the increase in material prices with the owners and increase future invoices for those price esca-
3. conducting budgeting and forecasting analyses to predict and manage the impact of these tariffs; and 4. for future contracts, ensuring the contract includes material price escalation features.
To adapt to changing circumstances, construction firms should be forwardthinking. That means carefully controlling costs and rethinking supply chains as initial steps. The broader economic impact of tariffs might inspire additional actions, for example, a shift in the types of projects pursued or materials used.
1. reassessing project budgets, with the aim of absorbing additional costs without compromising timelines 8
lations according to the verbally discussed changes); 2. negotiating with clients to adjust project scope and budgets;
Reworking supply chains
In a high-tariff environment, domestic producers have a natural advantage as imported goods become more costly and less available. It will take time for the U.S. domestic market to meet the market’s demand for tens of millions of tons of steel and aluminum per year. In the meantime, expect project timelines to be revised and companies to scramble for alternative suppliers. Companies that can quickly source these materials domestically will enjoy a more competitive posture through the transition period. Of course, contract negotiations raise their own complications. Construction Properties | May 2025