Steel and Aluminum Tariffs and Construction: What We Expect and How to Plan for Impact
The recent reinstatement of 25 percent tariffs on steel and aluminum imports is poised to significantly impact large-scale construction projects in 2025. HPM is proactively assessing projects, offering guidance, and supporting teams to keep projects moving through these changes.
In preparation, here are some insights on how these tariffs could impact projects this year with additional input from HPM Senior Mechanical Preconstruction Manager Michael Eskew. Learn what we are expecting so you can be prepared to mitigate possible risk.
Rising Material Costs
The construction industry heavily relies on steel and aluminum. The newly imposed tariffs are anticipated to raise the cost of these essential materials. Analyses suggest that construction costs could surge by four percent to six percent over the next 12 months.
“At the very least, these tariffs will put additional pressure on construction project budgets. Costs will increase from these higher material prices, and that will be passed on to project owners via higher contractor bids,” HPM Senior Mechanical Precon Manager, Michael Eskew said.
How to plan ahead:
- Lock in material prices early through advanced purchasing agreements.
- Explore alternative materials that are not subject to tariffs.
- Partner with suppliers to forecast and manage cost fluctuations
Supply Chain Disruptions and Associated Cost Increases
The U.S. imports a substantial portion of its steel and aluminum. The reinstated steel and aluminum tariffs could disrupt these supply chains, leading to delays and limited availability of essential components. Such disruptions may necessitate sourcing alternative suppliers, potentially increasing lead times and logistical challenges.
“Besides the potential delivery disruptions, tariffs will likely increase the costs in the supply chain itself. When tariffs are introduced or adjusted, many secondary costs change too – not just the higher raw material prices but also increased transportation expenses or other supplier cost pass-throughs,” Eskew said.
How to plan ahead:
- Identify and engage with multiple supply sources to diversify your procurement strategy.
- Build flexibility into project schedules to accommodate potential delays.
- Collaborate with logistics partners to streamline delivery processes.
Inflationary Pressures and Economic Implications
Beyond direct cost increases, the tariffs are expected to contribute to inflationary pressures within the construction industry and the broader economy. Higher material and labor costs could ripple through the supply chain, affecting various sectors reliant on construction activity, including real estate and manufacturing.
“Also, these tariffs will also have a slightly delayed impact on manufactured goods. Products that utilize steel and/or aluminum for their construction include appliances, construction equipment, mechanical systems, electrical components, machinery, batteries, and vehicles, just to mention a few,” Eskew said.
How to plan ahead:
- Incorporate price escalation clauses in contracts to manage rising costs.
- Conduct regular budget reviews to account for shifting economic conditions.
- Implement lean construction practices to enhance efficiency and reduce waste.
As we see changes start to develop, we will continue to provide clear and consistent communication with our clients on ways to navigate challenges related to tariffs. Keep up to date with the latest in our News section.
