On Nov. 25, 2024, then-President-Elect Donald Trump announced via social media his intention to impose 25 percent tariffs on materials provided by Mexico and Canada, as well as an additional 10 percent tariff on Chinese imports.1 President Trump indicated that these tariffs will be part of his first executive orders on Jan. 20, 2025, the date of his inauguration.
The three countries targeted by the tariffs consist of the largest U.S. trade partners. According to the United Nations COMTRADE database on international trade, in 2023, Canadian imports of iron and steel to the U.S. totaled $8.36 billion, Mexican imports of iron and steel totaled $3.73 billion, and Chinese imports of iron and steel totaled $612.96 million.
Though much about President Trump’s plan remains uncertain, these tariffs, if enacted, will be quite impactful on the construction industry. The proposed tariffs are expected to increase the cost of:
- Steel. Tariffs on steel, which is widely used in infrastructure and building projects, could lead to higher project costs and delays.
- Concrete. Tariffs on this critical component in infrastructure and other commercial construction projects could disrupt supply chains and increase costs.
- Lumber. Essential for construction and infrastructure projects, lumber could increase in price and affect project affordability if subjected to tariffs.
These tariffs and resulting price increases will significantly impact infrastructure projects budgeted before their announcement. Existing contracts may not include provisions for cost adjustments due to tariffs, leaving owners and contractors to negotiate how to handle these unexpected expenses. Additionally, the tariffs may also disrupt supply chains, leading to delays in material delivery and impacting project timelines and completion dates.
To mitigate the financial impact of tariffs on ongoing projects, construction professionals can consider the following legal strategies:
- Contractual Adjustments. Engage with stakeholders to amend existing contracts to account for increased material costs due to tariffs. This may involve demonstrating the financial impact of tariffs on project costs. Contractual force majeure and change in law clauses, if present, may provide some relief for contractors by allowing for contract renegotiation or adjustment due to unforeseen changes in law, such as the imposition of tariffs.
- Claims for Additional Compensation. Maintain detailed records of increased expenses directly attributable to tariffs. This documentation can support claims for additional compensation if the contract allows for such claims.
- Alternative Sourcing. Investigate sourcing materials from countries not affected by tariffs. This may involve reviewing existing contracts for flexibility in sourcing options. Entities may also consider sourcing materials domestically to avoid tariffs, which may also require contract adjustments.
- Financial Planning and Risk Management. Reevaluate project budgets to incorporate potential cost increases and explore financial strategies to manage these changes. Entities may also implement risk management strategies to address potential delays and disruptions in the supply chain.
- Legal Consultant and Compliance. Consult with legal professionals to assess the situation, review contracts and provide guidance on the best course of action.
President Trump’s pre-inauguration tariff announcements indicate that shifts in trade policy may come quickly. By employing these strategies, construction professionals can better navigate the challenges posed by new tariffs and mitigate their financial impact on ongoing projects.
20 Posts in 20 Days Leading to Inauguration Day on Jan. 20
Holland & Knight’s Transportation & Infrastructure Industry Sector Group is prepared to assist industry clients in adapting to the anticipated changes by the new administration. Our team is writing new blog posts each day leading up to President-Elect Donald J. Trump’s inauguration, with insights regarding likely impacts on the various segments of the industry, including Aviation, Construction, Maritime, Freight Rail, Motor Carriers, Transit and Autonomous Transportation. Bookmark our Election Impacts on Transportation & Infrastructure resource page to follow along.
Notes
1 President Joe Biden in May 2024 announced the completion of a review of China’s trade practices under Section 301 of the Trade Act of 1974. This review, undertaken by the Office of United States Trade Representatives (USTR), was a four-year review, which followed the previous Trump Administration’s 2018 tariffs on Chinese products. Based on this review, President Biden raised tariffs on certain Chinese steel and aluminum products from 7.5 percent to 25 percent.