Tariff Construction Risk Update – May 12, 2025

Lucas Giacalone
May 12
3 min read

By Kenneth F. Wille, PE – President, KOW Building Consultants

Disclaimer: The content and data in this post are the property of Kenneth F. Wille and KOW Building Consultants. All insights are intended as an estimate and potential outcome only and should not be interpreted as a financial or cost prediction. Use at your own risk.

🔍 Where Do U.S. Construction Tariffs Stand This Week?

Following major trade talks between the U.S. and China, we’re beginning to see some easing of tariff-related pressure—but uncertainty still clouds the outlook. This week’s update breaks down the current landscape, risk levels, and what we’re seeing on the ground.

As always, risk ratings below are based on Ken’s personal 10-point index (10 = highest risk).

1. Uncertainty – Risk Level: 8/10

A 90-day pause in the U.S.–China trade war has reduced tariffs significantly:

U.S. tariffs on Chinese goods: down from 145% to 30%
China’s tariffs on U.S. goods: down from 125% to 10%

While this has stabilized global markets in the short term, long-term agreements are still pending, and new wrinkles have emerged. Notably, the U.S. has ended the “de minimis” exemption for low-value Chinese and Hong Kong imports, adding a 120% tariff to that category.

Bottom line: This is the most promising sign of tariff relief in months, but risk remains elevated due to unresolved policy negotiations and fluid enforcement.

2. Lender Resilience – Risk Level: 8/10

As pipelines slow, lenders are turning more cautious. We’re seeing:

Increased scrutiny on plan & cost reviews
Heightened focus on stored material verification
A trend toward “pause” on hiring, expansion, and new developments

Bridge lending and affordable housing deals remain active, but cash flow and contingency planning are now central to lender decision-making.

“Cash is king” continues to hold true, particularly if loan-to-value ratios decrease later this year.

3. Construction Costs – Risk Level: 7/10

Material prices remain stable in the short term, with only low single-digit increases reported in trades like:

Timber
Concrete
Insulation
Brick

However, pressure points remain. A 25% reinstated tariff on steel and aluminum is still in effect, and 25% of scheduled shipments to the Port of Los Angeles were canceled in early May.

With only 6 weeks of material buffer in the U.S. supply chain, product shortages and cost spikes could emerge quickly if disruptions continue.

4. Current Tariffs – Risk Level: 7/10

Universal Tariff

10% on all imports (excluding Canada and Mexico)

Country-Specific Tariffs

China: Reduced from 145% → 30% for 90 days
Mexico: 25% on most goods
Canada: 25% on non-USMCA goods

Material-Specific Tariffs

Steel & Aluminum: 25% tariff reinstated
Lumber: Canadian lumber still subject to a 14.5% duty
Appliances/Fixtures: With 56% of appliances sourced from China, costs are still elevated despite the 90-day reduction
Copper: Under investigation for possible new tariffs in Q2

✅ Bottom Line & Recommendations

There’s reason for optimism—but not complacency.

Tariff Impact Clause All contracts should include language to address pricing volatility and delivery delays.
Supply Chain Diversification More companies are actively sourcing from India, Vietnam, and Mexico.
Contractual Adjustments Build in protections related to cost escalation, force majeure, and buyout tracking.
Monitoring Policy Changes With another potential shift in tariff policy ahead, stay informed and flexible.
Communication is Key Proactively update your teams and stakeholders about buyouts, subcontract terms, and any signs of cost fluctuation. Be prepared for change orders tied to both pricing and timing.

📊 We’ll continue monitoring the impact of tariffs and global trade on construction pricing and risk — and we’ll be back with another update next week.