Tariffs have long played a role in the construction industry, but recent developments have made them an increasingly pressing concern. For contractors, developers, and suppliers, fluctuating material costs due to tariffs can disrupt project budgets, impact contract negotiations, and create legal and financial challenges.
The Legal and Business Implications of Tariffs
Tariffs—government-imposed duties on imported goods—can significantly increase the cost of materials commonly used in construction, including steel, aluminum, lumber, and electrical components. These increased costs often lead to:
- Contract Pricing Uncertainty: If tariffs cause material prices to spike after a contract is signed, contractors may find themselves locked into unfavorable terms.
- Supply Chain Disruptions: Higher costs may limit material availability, delaying projects and triggering contract disputes.
- Compliance Challenges: Businesses operating across borders must ensure compliance with trade laws and regulations to avoid penalties.
Steps Construction Businesses Can Take
Given these challenges, construction businesses should consider the following strategies:
- Contract Protections: Review contracts for escalation clauses that allow price adjustments due to tariff-related cost increases. If none exist, consider incorporating them in future agreements.
- Supplier Relationships: Strengthen relationships with multiple suppliers to mitigate risks associated with price spikes or shortages.
- Legal Compliance: Stay informed about federal trade policies and any exemptions or relief measures that may apply to your business.
- Financial Planning: Work with legal and financial advisors to reassess budgets, bid strategies, and potential tariff-related contingencies.
DBL Law’s Guidance for the Construction Industry
With ongoing changes in trade policy, businesses in the construction industry must remain proactive. Our team at DBL Law is well-versed in construction law and can help businesses navigate these challenges, negotiate stronger contracts, and ensure compliance with evolving regulations.
If you have questions about how tariffs may impact your business, contact Joey Kramer at DBL Law for legal insights tailored to your needs.