While tariffs present significant challenges to supply chains and the construction industry, strategic planning and innovative solutions can help businesses minimize disruptions.


in inflated material prices that impact affordability for contractors, develop- ers, and consumers. The uncertainty surrounding tariffs can further disrupt long-term supplier relationships, leading to shortages and delays that extend project timelines and escalate costs. Unpredictable material availability


may force companies to maintain larger inventories, tying up capital that could otherwise support other operational needs. Ultimately, tariffs introduce finan- cial and logistical challenges that shape the efficiency, cost, and stability of supply chains in the construction industry.


Project Schedule and Fiscal Impacts Te ripple effects of increased material costs and supply chain disruptions are felt intensely in project timelines and budgets. When material expenses rise, construction firms must either absorb the additional costs or pass them on to clients. Absorbing these expenses can squeeze profit margins and limit investment in new projects or workforce expansion. Conversely, passing the costs on to


clients may make new construction proj- ects less appealing, potentially reducing demand for buildings and infrastructure. Government-funded infrastructure proj-


ects may also be affected, as increased costs could lead to budget reallocations or project downsizing. In some cases, prolonged delays may


trigger contract disputes between con- tractors, developers, and clients, leading to legal and financial complications.


Mitigation Strategies – Existing Construction Contracts Construction companies can adopt sev- eral strategies to mitigate the impact of tariffs. Building strong relationships with suppliers and staying informed about potential trade policy changes are essential to help companies navigate the complexities of tariffs most effectively. Engaging with industry associations and policymakers to advocate for exemptions or trade relief measures may provide regulatory support.


Diversifying suppliers can reduce


reliance on a single source of materials and provide alternative options when tariffs are imposed. Exploring alterna- tive materials not subject to tariffs or those less affected by price fluctuations can also be beneficial. Companies will likely consider increasing investment in domestic production or manufacturing partnerships to reduce dependency on imported materials.


Another risk management strategy is for companies to use forward contracts to lock in material prices in advance, providing protection against sudden cost increases. Leveraging technology, such as advanced supply chain management software and predictive analytics, can further help firms anticipate disruptions and plan accordingly. For cost increases that cannot be


avoided, contractors will need to explore their statutory and contractual rights and negotiate with the client to absorb some or all cost increases.


Mitigation Strategies – Future Construction Contracts Contractors should consider modifying their contracts to include price increases and supply chain disruptions as force majeure events, entitling the contractor to additional compensation and contract time. Such review and modification is essential before entering into a contract.


Conclusion While tariffs present significant challeng- es to supply chains and the construction industry, strategic planning and inno- vative solutions can help businesses minimize disruptions. By staying agile and proactive, firms can maintain project viability, sustain industry growth despite shifting trade policies, and continue delivering essential infrastructure and development projects that drive eco- nomic progress.


Nufar Sharon is an attorney with the San Francisco Bay Area office of Smith Currie Oles LLP. Bringing years of active involvement in the


construction industry, Sharon advocates for contractors, subcontractors, owners, engineers, architects, and other professionals in a variety of complex litigation and contracts matters.


CALIFORNIA CONSTRUCTOR MAY/JUNE 2025


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