Dear YouDig?,
I am majoring in construction management in O-H-I-O. Love this stuff. Help me out though. I am getting mixed signals from my professors and from what I read in various publications and social media, including some prominent tweeters. Tell me the truth … how do tariffs on imports from China really affect current construction industry and how can contractors avoid getting stuck with the bill?
A- Student
Dear A- Student,
Back to school, huh? Good luck. First, let’s be clear …Tariffs on U.S. imports increase the cost of foreign goods to U.S. concerns. The purpose of a tariff is to punish the exporting country by forcing domestic purchasers to either
(1) pay the price including tariff or
(2) to acquire materials from other “non-tariff” countries.
This may or may not be a national economic policy with a long-run benefit, but you are running a short run project NOW that must be profitable.
So:
Construction without materials??? Dreaming.
Construction with expensive materials??? May not start.
Construction with changes in materials prices mid-project???… Fightin’ words.
Before a project starts the project players consider steel, stone and more. Where from? What cost? How fast? Price? These days, the possibility of tariffs affecting your project is real. Failing to ask the critical questions before the project starts makes everyone vulnerable and maybe, ready to fight. If the tariff issue arises mid-project, a fight is a virtual certainty. So, NEWS FLASH. You better plan for it.
Contractors and Owners can avoid the fight by
(1) agreeing in advance to specific procedures if tariffs impact project materials, permit alternative sources/prices and adjust the schedule, or
(2) craft contract language to clearly establish tariffs as a force majeure that also results in an equitable adjustment in price and schedule, etc.
Whether you agree with the tariffs or not, by covering the possibility of tariffs in these wild times you can protect your jobs long term and short term,
YouDig?
