Tariff Risk Update – May 19, 2025

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?

With the 90-day trade truce between the U.S. and China still in effect, pressure from aggressive tariffs has eased—but uncertainty remains high. While some material prices are stabilizing, underlying supply chain issues and rising labor costs continue to drive project risk.

As always, the observations below are based on our internal monitoring and Ken Wille’s 10-point risk scale (10 = highest risk).

1. Uncertainty – Risk Level: 8/10

The U.S.–China tariff pause, which dropped duties on Chinese imports from 145% to 30%, has provided short-term relief. But structural issues remain unresolved. Adding to the complexity, the U.S. has officially ended the “de minimis” exemption for low-value imports from China and Hong Kong, triggering a 120% tariff on affected goods.

Even with the easing, global trade policy remains unpredictable—and that means uncertainty continues to weigh on planning, pricing, and procurement.

2. Lender Resilience – Risk Level: 8/10

Across the industry, we’re seeing a shift from rapid development to cautious pause.

• Lenders are increasing scrutiny on plan and cost reviews

• Stored material verification is a growing focus

• Developers are slowing hiring and deferring expansion

This approach has led to more interest in affordable housing and bridge lending, especially for projects needing capital to get across the finish line. With loan-to-value ratios under pressure, cash remains a key advantage for borrowers in the months ahead.

3. Construction Costs – Risk Level: 9/10

Cost pressure is rising—driven by both tariffs and labor.

• Construction labor wages have increased 4.1% YoY, adding to overall cost escalation

• Steel: Up 15%–25% since January

• Aluminum: Up 8%–10%

• Lumber: Up 10%–15%, partly due to tariff anticipation

• Drywall and other Mexican-sourced materials are facing cost hikes

According to the Turner Building Cost Index, Q1 2025 reached 1459, signaling continued pressure in non-residential construction. Our analysis suggests tariffs on Canadian lumber and Mexican building products could increase home construction costs by 4%–6% over the next 12 months.

4. Current Tariffs – Risk Level: 7/10

Here’s where U.S. tariffs stand as of this week:

Universal Tariff

• 10% on all imports (excluding Canada and Mexico)

Country-Specific Tariffs

• China: Temporarily reduced to 30% (from 145%) for 90 days beginning 5/14/2025

• Mexico: 25% on most goods

• Canada: 25% on non-USMCA imports

Material-Specific Tariffs

• Steel & Aluminum: 25% tariff in effect

• Lumber: Canadian lumber exempt from new tariffs, but still carries a 14.5% duty

• Appliances & Fixtures: Heavily affected due to 56% import rate from China—benefiting from the current pause

• Copper: Potential 25% tariff under investigation, likely to affect plumbing and electrical trades

✅ Bottom Line & Recommendations

While the softening in trade language is a welcome shift, final terms are far from settled. The current pause offers a window to plan, but we’re not out of the woods.

Here’s what we recommend:

• Tariff Impact ClauseInclude transparent pricing language in all contracts and subcontracts. Document and communicate any cost fluctuations or supply chain delays.

• Supply Chain DiversificationExplore alternatives in India, Vietnam, and Mexico to minimize exposure to China-based tariffs.

• Contractual AdjustmentsBuild escalation clauses and force majeure protections into contracts where appropriate.

• Monitor Policy ChangesStay on top of evolving international trade news—future adjustments may be announced with little notice.

• Proactive CommunicationUpdate all parties regularly on buyouts, sourcing changes, subcontractor terms, and risk exposure. Be prepared for cost-related change orders as the year progresses.

📊 We’ll continue to share real-time insights every week as part of our commitment to helping clients manage construction risk.

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