On August 29, the U.S. Court of Appeals for the Federal Circuit ruled that President Trump’s use of emergency powers to impose sweeping global tariffs was unlawful under the International Emergency Economic Powers Act (IEEPA). Enforcement is delayed pending a potential Supreme Court review by mid-October.
If upheld, businesses impacted by broad-based tariffs could experience considerable cost relief, while U.S. importers may have the chance to pursue refunds on duties already paid. In the construction industry, tariff-driven cost pressures have reshaped how firms approach project pricing, supplier negotiations and material sourcing. With the outcome still uncertain, contractors should assess their exposure and prepare for multiple scenarios.
A Tariff Rollback Could Ease Cost Pressures
If the Supreme Court allows the lower court ruling to stand, contractors could experience significant shifts in their cost structures and project viability.
Potential impacts of a tariff reversal include:
- Material cost relief: Prices of key construction materials may decline.
- Improved sourcing conditions: For imported materials, customs bottlenecks and lead times could shorten, reducing inventory costs.
- Contractual and financial relief: Contractors who added escalation clauses, contingencies or renegotiation terms may experience more cost certainty and reduced risk.
- Boost to project starts and investment: Developers may revisit shelved projects, and fixed-price contracts may carry less risk under a more stable pricing environment.
The legal and financial implications will depend heavily on whether and how the Supreme Court frames its final decision. Notably, this ruling would likely not impact tariffs imposed under other authorities, including Section 232 for steel and aluminum.
Even if tariffs are lifted, contractors should remain cautious. Retaliatory trade measures and domestic production incentives, particularly those outlined in the One Big Beautiful Bill, are likely to continue shaping material costs, sourcing decisions and long-term pricing trends.
Strategies Contractors Should Act on Now
With the legal outcome pending, contractors should take proactive steps to assess risk and prepare for multiple outcomes.
Consider these key strategies:
- Model financial scenarios: Build project budgets under three conditions: status quo, full rollback and partial relief of tariffs.
- Track tariff-related costs: Break out material and subcontractor cost codes to isolate tariff-related expenses and quantify impact on a project-by-project basis.
- Review contract language: Ensure contracts include provisions for tariff-related cost adjustments or separate tariff charges to allow for renegotiation.
These best practices can help maintain financial visibility and protect margins while awaiting further clarity.
Strategies Contractors Should Continue to Follow
Regardless of the legal outcome, volatility remains a risk. Contractors should continue to follow these best practices to strengthen resilience and manage long-term exposure.
Best practices to follow include:
- Strengthen contract and vendor language: Continue to clarify escalation clauses, substitution terms and force majeure triggers.
- Enhance financial visibility and liquidity planning: Align finance and field teams on cost impacts and billing schedules and engage banks and sureties early.
- Diversify procurement models: Lock in pricing through forward contracts and staggered purchasing; explore alternative sourcing and offsite storage.
- Evaluate alternative materials and inventory tactics: Identify substitutions for high-tariff materials and secure inventory at favorable rates.
Contractors should remain informed, flexible and ready for change, and continue to implement scenario planning, contract review and cost planning as essential tools to navigate uncertainty.
Expert Guidance for Contractors Managing Tariff Risk
Grassi’s Construction advisors support contractors in modeling financial outcomes, evaluating tariff exposure and developing strategies to manage ongoing risk. For more insights, explore our article, Navigating the New Tariff Landscape: Solutions for the Construction Industry, or reach out to Carl Oliveri, Construction Practice Leader and Partner.
Frequently Asked Questions
How can construction firms protect margins during trade policy shifts? Strategies include using escalation clauses, modeling multiple cost scenarios, diversifying procurement sources and tracking tariff-related expenses to improve forecasting and negotiation leverage.
What types of construction materials are most affected by tariffs? Steel, aluminum, copper, lumber and certain mechanical and electrical components are commonly impacted, especially those sourced internationally.
How can construction CFOs track tariff-related costs effectively? Use distinct cost codes, integrate tariff tracking into project accounting systems and coordinate with procurement teams to ensure visibility across bids, budgets and actuals.
How do trade policy changes affect construction supply chains? Tariffs can cause delays, increase lead times and reduce the availability of key materials. Strategic sourcing, inventory planning and supplier diversification are essential to stay
