CHANGING LEGAL L ANDSCAPE


How Contractors Can Manage Tariff Risks in Today’s Market


BY NUFAR SHARON, SMITH CURRIE OLES LLP T


he implementation of new tariffs on imported goods, including steel and aluminum, will have


significant impacts on the construction industry and its supply chain. As global trade conditions change, businesses must adjust to higher costs, potential delays, and market instability. One of the most immediate implica- tions of these tariffs is the rising price of essential raw materials, including steel, aluminum, lumber, and concrete. Contractors and developers will experi- ence increased project costs, potentially leading to budget overruns, delays, and even the postponement or cancellation of projects due to financial constraints.


Cost Impacts One of the most direct effects of tariffs on the construction industry is the surge in material costs. When tariffs are imposed on steel and aluminum, for example, the prices of these vital materials rise. Tis impacts not only raw material costs but also the prices of finished products such


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CALIFORNIA CONSTRUCTOR MAY/JUNE 2025


as beams, pipes, construction hardware, finishing hardware, and other structural elements. In turn, this forces construction com- panies to contend with higher expenses, which can lead to inflated project budgets and increased costs for clients and con- sumers. Small and mid-sized construction firms may be affected disproportionately, as they have less financial flexibility to absorb sudden cost increases compared to larger companies.


Supply Chain Impacts Tariffs can also significantly impact sup- ply chains in the construction industry by driving up material costs, disrupting sourcing strategies, and causing project delays. Many essential construction ma- terials such as steel, aluminum, lumber, and concrete are frequently imported, and tariffs on these materials can inflate costs, straining project budgets. As a result, contractors and developers may be forced to seek alternative suppliers or shift to domestically produced materials,


which can introduce higher costs or compatibility issues with existing designs. Additionally, tariffs can create supply


chain disruptions by delaying the deliv- ery of critical materials and equipment, ultimately slowing down construction schedules and increasing labor costs. Companies that depend on just-in-time inventory management may face un- predictable lead times, necessitating the stockpiling of materials at increased storage costs. Furthermore, the regulatory complex- ities associated with tariffs add adminis- trative burdens, requiring construction firms to navigate evolving trade policies, customs procedures, and compliance measures. In some instances, tariffs may lead companies to reconsider their sourc- ing strategies. Tis can potentially shift the production of prefabricated or modular components to domestic markets, altering cost structures within the industry. While tariffs can offer temporary pro- tection for domestic manufacturers, they may also reduce competition, resulting


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