Price hikes on steel and other essential materials for the construction industry are anticipated in the wake of the president’s newly imposed a 25% tariff on steel imports, policy changes and economic factors.  

While U.S. trade partners await the court’s decision on whether invoking the authority of the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act (NEA) to levy these tariffs should be upheld, they prepare to deal with the economic challenges if the tariffs hold.

Last year, China exported 22.7% more steel than it did in 2023, reflecting a reduction in domestic demand that enabled it to sell surplus to the global markets. Much of what China exported consisted of materials commonly used in construction, such as H-beam steel and steel rebar. Because of the competition, international steelmakers were pressured into lowering their prices to match. The landscape looks very different this year.   

According to a joint alert from NECA’s Labor Relations and Government Affairs departments, this tariff could result in:

• Higher material costs, especially for copper wiring, electrical panels and transformers
• Supply chain delays and interruptions
• Contractual issues, especially if current agreements don’t allow for cost adjustments
• Sourcing from domestic suppliers—but if they can’t meet the heightened demand, prices may rise even more

Higher costs could cause project delays or increased expenses, which will undoubtedly be passed on to end users. Small business owners are particularly concerned about the situation, given that they are already struggling with tight profit margins due to persistently high interest rates.

On the brighter side, some industry experts believe the tariffs could encourage domestic steel and aluminum sectors to increase production and create new jobs. Although prices will most certainly go up, tariffs might implement more controllable and predictable effects than the market instability experienced during the COVID-19 pandemic, which saw price hikes higher than those expected under the new tariffs.

NECA and other industry organizations have advised contractors to be proactive. The Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) suggested adjusting contracts in anticipation of cost increases and exploring domestic sourcing options. NECA suggests adding cost escalation clauses to new contracts or evaluating current agreements for provisions like “force majeure” or “change-in-law” to address tariff-related risks.

Other strategies include:

• Inventory management: using creative strategic inventory management and coordinating with existing third-party vendors to avoid materials shortages
• Policy advocacy: urging policymakers to influence trade negotiations and provide long-term economic relief
• Legal and financial consultation: conferring with legal and financial experts to evaluate and ensure compliance with contracts

In addition, some businesses are using market intelligence tools for data such as real-time metal price updates, forecasts and cost analysis tools. This helps them make better purchasing decisions that may offset some of the fallout from the new tariff.