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For those of us following the recent news regarding U.S. tariffs, you may be experiencing whiplash. On Saturday, February 1, 2025, President Trump announced a 25% tariff on imports from Mexico and Canada. Additionally, President Trump announced a 10% tariff on goods from China. Two days later, on Monday, February 3, President Trump announced that he would delay imposing tariffs on Mexico and Canada for 30 days based on agreements he reached with the leaders of those countries. 

On February 10, President Trump signed additional proclimations putting in place 25% tariffs on steel and aluminum. The reforms, which take effect on March 4, include eliminating all alternative agreements, applying strict “melted and poured” standards, expanding tariffs to include key downstream products, terminating all general approved exclusions, and cracking down on tariff misclassification and duty evasion schemes. The construction industry will likely face significant challenges. According to Grassi and Company, contractors should work with their financial professionals to forecast the impact of rising material costs, inflationary pressures, and supply chain disruptions, to proactively identify where triage will be needed. 

What is a Tariff?

A tariff is a tax imposed by one country on goods imported from another country. Tariffs are collected at the ports where the goods enter the country. While tariffs can be avoided by purchasing goods from domestic sellers, that is not always possible.

Many goods frequently used by �鶹��� contractors are procured from outside the U.S., such as steel, aluminum, fasteners, manufactured components, and HVAC units. Thus, a 25% tariff on aluminum imported from Canada would significantly alter the bid and cost structure for a �鶹��� contractor installing the HVAC duct in a new office building. So, too, would a 10% tariff on fasteners and HVAC parts imported from China.

Can the President Impose Tariffs?

While the U.S. Constitution entrusts Congress, not the President, with authority over U.S. tariffs, Congress has sometimes delegated its authority to the President.

For example, Section 232 of the Trade Expansion Act of 1962 (“Section 232”) empowers the President to impose tariffs on certain goods if they threaten “national security.” Likewise, Section 301 of the Trade Act of 1974 (“Section 301”) empowers the President through the Office of the United States Trade Representative (“USTR”) to impose trade sanctions on foreign countries that violate U.S. trade agreements or engage in acts that are “unjustifiable” or “unreasonable” and burden U.S. commerce.

President Trump used Section 232 to impose tariffs on steel (25%) and aluminum (10%) imports from most countries during the first Trump administration. President Trump also used Section 301 to impose tariffs targeting Chinese goods, covering a wide range of imports totaling approximately $370 billion.

What Can We Expect under Trump 2.0?

While goods from China appear to be the main target of President Trump’s tariffs, other countries, including Canada and Mexico, seem to be under scrutiny. 

As noted above, on February 1, 2025, President Trump announced a 25% tariff on imports from Mexico and Canada, only to delay the tariffs for 30 days two days later. Whether the parties will be able to reach an agreement before March 3, 2025, remains to be seen. At a minimum, contractors should be aware that there will be more uncertainty regarding tariffs and that they should take steps to prepare.

Remember, in July 2020, the United States-Mexico-Canada Free Trade Agreement (USMCA) went into effect, replacing NAFTA. When negotiating the USMCA, the Trump administration insisted on including a sunset/review clause in the treaty, allowing the United States to either further negotiate provisions or end the treaty altogether. The review clause provides that the parties will review the treaty before the deadline. On July 1, 2026, the United States, Mexico, and Canada will confirm whether to continue the agreement in writing. This may provide additional fireworks as the parties negotiate whether to modify or continue the USMCA.

How Can �鶹��� Contractors Prepare?

At this point, uncertainty regarding tariffs is the only certainty. As a result, �鶹��� contractors should now take steps to mitigate the impacts of tariffs on construction-related imports. For example, �鶹��� contractors should consider any of the following actions:

• Buy in Bulk—Buying materials in advance avoids any uncertainty regarding price. However, it’s not always feasible, and plans for how to store the additional material need to be addressed as well.
• Locate U.S. Suppliers—Now is the time to explore whether domestic suppliers of specific products or manufactured items exist. This, too, is not often feasible, and contractors may need to explore other options. Also, while domestic suppliers may be available at a lower cost, timing may be a concern because if goods cannot be supplied on time, a contractor may be liable for liquidated damages if the project is delayed.
• Revise and Update Construction Contracts and Subcontracts—For new contracts and subcontracts, �鶹��� contractors should review the cost structure and update pricing based on the latest tariffs and potential tariffs. Contractors should also consider adding provisions allowing for increased material costs to be passed through to the owner or general contractor. For example, consider adding provisions relating to tariffs or revising preexisting language about changes in laws and force majeure to expressly outline how price increases will be handled or how to provide additional time for completion if additional time is needed to source local material. 
• Analyze Existing Contracts and Subcontracts—For existing contracts and subcontracts, contractors should review any contractual provisions relating to tariffs, changes in laws, and force majeure to determine if they can pass along higher costs upstream should tariffs mean the cost of their materials go up. (Consider including price escalation clauses in contracts) 

With the ever-changing landscape of U.S. tariffs, �鶹��� will continue to monitor this issue and provide additional updates.