Litigation surrounding the Trump administration’s tariff policies continues to dominate news cycles. Just recently, the U.S. Court of Appeals for the Federal Circuit heard oral argument in a consolidated case filed by 12 states and various import companies challenging President Trump’s authority to impose tariffs. In an unusual move, the Court heard the case en banc, with all 11 judges participating in argument. The Court previously issued a temporary stay of a lower court’s injunction against future tariffs, meaning the tariffs remain in effect until the litigation is resolved.

The tariff landscape is changing daily and, for better or for worse, the tariffs (and the resulting litigation) are here to stay—and will impact more industries than just importers.

In particular, the construction industry faces unique challenges because many of the tariffs directly impact necessary construction materials, including, among other things, copper, aluminum, steel, lumber, timber, and other wood-derivative products. Thus, contractors and other construction industry professionals must be up-to-date on new developments to be prepared to adapt their legal mitigation strategies.

As of the date of print, lumber, timber, and wood derivative products are not subject to tariffs. However, tariffs on aluminum and steel were first effective on March 12, 2025, then increased on June 5, 2025, and were amended on June 15, 2025. Currently, these tariffs are 25 percent for UK-origin products and 50 percent for all other foreign-origin products. Effective August 1, 2025, there is a 50-percent universal tariff on imports of semi-finished copper products (such as copper pipes, wires, rods, sheets, and tubes) and copper-intensive derivative products (such as pipe fittings, cables, connectors, and electrical components).

This may seem like new territory, but we have been here before. In 2018, Trump imposed a 25-percent tariff on steel and a 10-percent tariff on aluminum imports. Material prices rose but eventually went back down to pre-tariff prices.  Domestic production increased, but not fast enough to bring prices down. Overall higher material costs resulted in higher input costs, translating to reduced growth.

Will the same happen in 2025? From a legal perspective, it is difficult to predict how the tariffs will impact the construction industry directly, so the best advice is to be informed to ensure any potential shake-up does not throw your business off balance and to be aware of opportunities to mitigate against potential risks.

POTENTIAL DISRUPTIONS CAUSED BY TARIFFS

Supply Chain Interruptions — Tariffs can disrupt established supply chains, leading to material shortages, delayed deliveries, and longer project timelines. Upon learning of President Trump’s threats to impose tariffs, many contractors stockpiled materials before the tariffs took effect, further stressing supply chains.

Budget Overrun — At their core, tariffs may ultimately inflate the cost of imported materials, both raw and finished products. Increased material costs can lead to budget overruns, especially for projects with fixed-price contracts.  

Uncertainty and Risk — Tariffs can create economic instability and uncertainty on a global scale. For contractors, this uncertainty can make it difficult to predict costs and manage risk. If tariffs increase overall costs, it can take a significant toll on industries like construction where long-term planning and stability are important.

Project Viability — Tariffs may result in increased costs, which can make initiating or continuing some projects unattractive, leading to breached contracts and/or reduced demand. For new construction, commercial and residential clients will be aware of the uncertainty and may be hesitant to engage in new and elective repair work.

Retaliatory Tariffs — Retaliatory tariffs from other countries only further artificially inflate the cost of imported goods. Most of the countries that have implemented retaliatory tariffs have agreed to delay their implementation, contributing to the uncertainty.

Litigation — Cost-overruns and delays are often synonymous with construction litigation.  With the introduction of tariffs, legal professionals expect to see parties litigate over competing interpretations of contract language and the use of force majeure and change-in-law clauses. From a regulatory perspective, increased material costs could force contractors to look for suppliers who may not be in compliance with applicable federal, state, and local regulations, creating more legal risk.

MITIGATION STRATEGIES FOR STAYING STEADY

We have been here before and have learned lessons which can provide guidance into how best to navigate today’s trade policy. From a legal perspective, contractors and other construction industry professionals should take proactive steps in order to mitigate against the potential risks associated with tariffs. Following are some such steps that can be taken:

  1. Contract carefully. For new projects, contractors should negotiate carefully and consider adding contractual language that addresses potential cost fluctuations and delays. Consider including escalation, force majeure, change-in-law, and alternative material clauses. Contractors should also consider using cost-plus arrangements instead of fixed-price/max guaranteed price agreements and should include tariff contingencies in proposed project pricing. For existing projects, contractors should review all contractual language with an eye towards vulnerability and should consider renegotiating for reduced scope, when possible. For federal government projects, contractors should be well acquainted with President Trump’s Feb. 26, 2025, Executive Order that requires agency heads to review and justify existing contracts. 
  2. Diversify suppliers. Contractors should explore alternative sources for supplies, including domestic sources. While tariffs do result in increased domestic production, lessons from 2018 show that domestic production alone will not meet demand. Contractors should reduce dependence on a single supplier and consider forward contracting while managing existing inventory, whether through supply chain transparency or performing in-house inventory. Contractors should consider value engineering to reduce costs, including leasing equipment and re-exporting it after use. Although leasing and re-exporting requires additional compliance hurdles, there could be cost savings with import duties. Finally, construction industry professionals should confirm the country of origin on imported materials. Errors in custom forms can increase duties and lead to financial penalties and unnecessary delays.
  3. Stay Informed. All construction industry professionals should communicate with legal counsel to monitor tariff developments in real time, as President Trump’s trade policy is constantly in flux. Because it is not expected to see the real impact until later this year, it is important to stay informed and be prepared.

FORWARD THINKING

Staying grounded in the midst of the global trade policy shake-up may prove difficult for even the most savvy construction professionals. Although lessons from 2018 remain informative, the changing political landscape requires forward and strategic thinking to minimize risk. Engaging with competent counsel regarding the tariffs’ lasting effects will safeguard your business from the supply chain disruptions and economic changes.

about the author

Christopher S. Drewry is a partner in the Indianapolis office of the law firm of McCarter & English, LLP (www.mccarter.com), where he focuses his practice on construction law and litigation, labor and employment law and litigation, and commercial litigation.  Chris is a current member and past chair of the Construction Law and Litigation Committee of the International Association of Defense Counsel.He can be reached at cdrewry@mccarter.com. Kaylin O. Cook is an associate at McCarter & English, where she focuses her practice on business litigation, including construction law and labor and employment law. She can be reached at kcook@mccarter.com.