More Tariff Volatility – Tips for Implementing a Tariff Strategy

Having a tariff strategy isn’t optional anymore; it’s part of doing business in today’s market. Since the start of President Trump's second term, tariffs have been disrupting material pricing—and the volatility isn’t going away. This week, the president floated the idea of 50% tariffs on goods from the EU.  Contractors need to be prepared not just for more price increases, but also price swings in both directions

This isn’t new—but it is a reminder that in a fast-changing tariff environment, contractors and owners need clear strategies to allocate risk. Material costs can spike, drop, or become unpredictable overnight due to geopolitical shifts. Projects that don’t account for these risks are vulnerable.

We are finding that owners increasingly understand that contractors can’t absorb unlimited risk, but they also want to avoid open-ended pricing or anything that resembles a backdoor cost-plus contract. We regularly work with clients to develop practical solutions that are structured, documented, bounded, and reflect the realities of the environment. 

Effective tariff strategies often incorporate one or more of the following elements:

• Tariff Contingency or Allowance - Carving out specific, capped funds to absorb cost changes tied to defined tariff risk.

• Escalation Clauses Based on Specific Materials or Trades – Allowing escalation for items most likely to be affected and where prices cannot be secured in advance. This is often attractive to owners because it only allows relief on limited and specific categories and eliminates the concern that the contractor will use the clause to convert the contract into a cost-plus arrangement.

• Escalation Based Upon Set Measurable Criteria - Structured to allow adjustments based on:
  • Indexed changes (e.g., ENR or PPI)
  • Direct pass-through for increases above a threshold based on pre-contract estimates and available actual costs
  • Shared-risk formulas (e.g., split increases above a baseline)
  • Material substitution clauses if key inputs become cost-prohibitive

• General Cost Escalation Protection – Allowing contractors to obtain relief for all tariff-related costs (not just the tariffs themselves). 

We have developed a range of sample contract provisions, strategy materials, and talking points that we’re happy to share. If you’re navigating these issues—whether in contract negotiations or during project execution—we welcome the opportunity to connect, exchange ideas, and provide any resources that might be helpful. There is no charge for these resources and conversations; our goal is to support informed, proactive risk management across the industry.

We believe it’s in everyone’s interest—contractors, owners, subcontractors, and the industry as a whole—to share practical solutions and stay ahead of the curve. If you have any questions, please reach out to Kenneth Rubinstein or Nicholas Dube.