Mitigating the Impact of Tariffs in Construction

The construction industry faces constant financial uncertainty, and the 2025 escalation of global tariffsmandated by executive order drew attention to their potential impacts. While no crystal ball can tell exactly when they will go into effect, how long they will last or how much they will fluctuate, one thing is certain: Tariffs can affect the industry in the form of increased material costs, supply chain disruptions and general market uncertainty.

Owners and contractors are already implementing reactive solutions to mitigate risk in the short term. At the same time, companies need to explore proactive strategies that help ensure long-term success — regardless of external market factors.  

Reactive Approaches (Short-Term Solutions) to Tariffs

The possible problems caused by tariffs — specifically as they relate to cost and delivery of materials — is not entirely new to the industry. During the COVID-19 pandemic, several traditional mechanisms were enacted to protect upended projects.

Engaging in reactive approaches to mitigating the effects of tariffs may prove useful, but it’s important to weigh the pros and cons of each.

Proactive Approaches (Long-Term Solutions) to Tariffs

The uncertainty caused by tariffs necessitates proactive strategies that go beyond these immediate solutions. By thoughtfully leveraging collaborative contracts and maintaining accurate, up-to-date data, stakeholders at all levels from the top down can work together to build upon lessons learned and navigate future challenges with greater flexibility.

Collaboration and Communication 

Employing business practices that encourage collaboration and communication can create trust between teams. This can lead to greater stability and counteract the volatility of the moment.  

Build strong partnerships.

Owners attempting a design-bid-build project during such volatile times are likely to face challenges. That’s why partnering early with groups that possess the necessary insights and data is important. The lowest bid isn’t always the best partner. Hiring the right GC that has the best insight and also the best relationships with trade partners who in turn take part in the collaborative delivery from the start aligns expectations and realities.

Use collaborative delivery methods.

When engaging in these principles it is important to make sure all contracts reflect the same commitment to collaboration in their structure. The focus should shift from transferring risk (through blanket escalations and delay clauses) to sharing success.

Empower trade partners.

Flexibility only happens when people have the information they need to be flexible. If owners can share their needs downstream, then the flow of information upstream should be welcomed. When trades see a spike in prices or contractors see delayed lead times, they can share that information so that at every step of the way considerations of which avenue to pull from: cost, quality or time. 

Embrace a flexible mindset.

Traditional methods may not always work in non-traditional times. A flexible mindset can be employed by partners early on in the process to encourage better forecasting, pricing and procurement practices. 

Creativity: There’s always more than one way.

Certainty of delivery is necessary, but when supply chain disruptions threaten the materials needed to deliver that certainty flexibility needs to transition to creativity. Estimators should be prepared to bid a project with different options that still achieve the final goal, as owners may request this. 

Asking the question “how else can we satisfy design” or using Target Value Design to consider what other materials or sources are available will help reduce the onsite volatility tariffs could create.  

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Making Data-driven Decisions

Analytics possess the power to identify trends, leverage data and gain clarity from market insights. They can be used to form learning patterns that can improve any project regardless of circumstance.

Track and use historical data.

Any estimate is a combination of historical costs that need to be normalized to fit today or projected to fit the future. Taking the time to find and catalogue previous project costs will only strengthen the financial story that satisfies all parties. 

Stay up-to-date on current pricing.

Tracking and cataloguing fluctuations in material costs on a regular basis allows greater precision when it comes to bids and procurement.

Get all data — not just costs.

Creating logs that track lead times of key equipment and building materials most sensitive to changes in the market. Then, for example, if a GC is asked why a necessary material is 20% above the current market, they can present a clear and well-founded response. This kind of clarity and transparency builds trust — and that’s an important component between parties when things get difficult.

Cross-reference everything.

Taking the time to put the data together allows for thinking outside the immediate problem. Consider integrating procurement logs and cashflow, for example, so that tracking internal funds needed at earlier points won’t come as a surprise. Using all data points becomes a safety net for every stakeholder on a project from owner down.

Utilize software purpose-built for construction.

Information duplicated across isolated solutions leaves too much room for error. Pulling from various programs like Excel, P6 or Microsoft Project is inefficient. By creating a single source of truth for project data helps make procurement predictions and supply tracking easier for all project stakeholders to access. 

An investment in project management software is an investment in communication and collaboration that can make moments of uncertainty easier to navigate.

In stable times there is still relatively little we can know for certain about the future. When dealing with unexpected complications a proactive, holistic, data-driven approach is so important. It enables stakeholders on any project to communicate truthfully, set realistic expectations and protect the project timeline in the onset of uncertain times now or in the future. 

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