Prepared, Not Scared: Navigating Tariffs in Construction Projects
Tariffs and shifting trade dynamics can feel overwhelming when it comes to construction projects, from escalating costs to sourcing delays, owners may be feeling apprehensive. But with strategy, open communication, and a flexible mindset, these challenges can be navigated with confidence.
What are Tariffs?
First things first, it’s important to understand what tariffs are. Tariffs are government-imposed taxes or duties on imported goods. These are often used to encourage domestic production or to encourage change in trade practices. When a tariff is levied on an imported product, the price of that product increases. Looking at the construction industry, this means a potential impact on building materials and components sourced from outside the United States.
Understanding the Impact
Putting things into perspective can help alleviate some of the concerns about the impact of potential tariffs. Let’s use the example of Construction Project A, which has a $100 million budget. Generally speaking, 40% of a project’s budget is made up of material costs and around 25% of that could be impacted by tariffs. That means around $10 million of Construction Project A’s budget is for materials that could see a price increase. If that amount increases by 25% due to tariffs, that comes to a $2.5 million increase for Construction Project A, or just 2.5% of the overall project budget. While this might sound like a substantial figure, the reality is that construction projects routinely encounter similar budget pressures—even without the influence of tariffs—and these challenges can be effectively managed with the right strategies. (Please note that these are rough estimates, used to give a general understanding, and each project and situation is unique.)
Strategies for Success
In times of market uncertainty, communication with your team will be key. As an owner, now is the time to lean on the knowledge of your Owner Project Manager or Owner's Representative. They tie all of the areas of the team together and will use their industry experience to work to actively be ahead of any potential impacts or changes. They are well-versed in managing construction budgets and real-time changes. Know that strategies and plans may change depending on which phase a project is in. Below are key recommendations that Huffman Keel Partners would implement or suggest per construction phase.
Design Phase
Embrace flexibility within the project. The design and project team must be willing to pivot if specific materials become cost-prohibitive or have a lead time that will delay the project. And when possible, source materials that are local. Not only could this reduce the tariff impact, but it also supports smaller local businesses.
Planning Phase
It’s always recommended that a project’s budget include an amount for contingency. This is a safety net of budgeted money set aside for the unexpected expenses that can and will arise during a project. In today’s market, it would be wise to increase this amount by at least 2% to help specifically cover any costs that could increase due to tariffs or material changes that need to be made.
Procurement & Construction Phase
As with earlier phases, flexibility remains key during procurement and construction. Consider phasing the project to allow work to begin while adapting to evolving market conditions. This approach helps maintain momentum and provides the agility to respond to pricing or material availability changes. Take time to evaluate your material needs—some items may be worth procuring early to get ahead of potential tariff increases. And don’t hesitate to ask tough questions. It’s entirely appropriate to request documentation, proof of price increases, and detailed explanations to ensure transparency and informed decision-making.
Optimism, Not Fear
Yes, there’s uncertainty in the industry. But the reality is that construction costs will continue to rise, tariffs or not. The key is staying proactive, flexible, and prioritizing strong communication and collaboration. By doing so, your project can not only succeed but also serve as a testament to resilience and a chance to spotlight trusted local partners. With over 25 years of experience, Huffman Keel Partners is here to guide you every step of the way—keeping you informed, confident, and on track through to completion. Whether you’re just getting started or navigating a critical point, we’re here to support you with expertise every step of the way. If you’re wondering how an Owner Project Manager can strengthen your team and safeguard your vision, we would love to talk.
