A guide for construction executives
BY SCOTT SCHULTZ, CHIEF UNDERWRITING OFFICER, THE HARTFORD AND MICHAEL WOLF, U.S. ECONOMIST FOR THE HARTFORD’S GLOBAL INSIGHTS CENTER
U.S. trade policy is adding another layer of challenges for construction companies after years of persistent inflation, supply chain concerns and critical labor shortages.
Tariff policies could have wide-ranging cost implications for construction companies beyond the price of overseas building materials. Historically, global tariffs have also raised prices on domestically made materials.
To help navigate ongoing uncertainty, below are four key strategies for construction leaders as trade and geopolitical developments continue to unfold.
1. Understand the Changing Landscape of Tariffs
Tariff awareness requires equal focus on trade history and current events. For example, between World War II and 2018, tariff-setting power moved significantly from Congress to the White House. However, during that period, presidents largely supported free trade policies that didn’t often require the use of tariffs.
According to Pew Research Center, a major turning point came in 2001 when China joined the World Trade Organization (WTO), gaining broad access to global markets. This move intensified existing trade tensions and helped China become the world’s leading manufacturing nation.
In 2011, the U.S. trade deficit nearly doubled from $35 billion in 2001 to $62 billion, while manufacturing employment cratered from 16.4 million to 11.7 million over the same one-decade period. By 2018, these impacts fueled a populist backlash to free trade that accelerated U.S. tariff policy that year and again in 2025.
As of mid-2025, tariff discussions remained active with many countries. Still, construction leaders have been feeling the impact since February due to higher tariffs on steel and aluminum-based products affecting domestic pricing.
In 2018, a 25% tariff on imported steel increased the cost of domestically produced steel by up to 20%. Construction companies are already seeing similar impacts from February 2025 tariffs placed on construction materials using steel and aluminum. Tariffs increased for those categories alone from 25% to 50% in June.
Specific tariff rates will change over time, so understanding the environment and how it evolves will be critical for construction firms and their procurement strategies.
2. Assess Supply Chains, Backlogs and Contract Terms
Construction firms have so far mitigated many cost pressures by stockpiling materials. However, this strategy offers only short-term relief for the calendar year 2025, as new challenges loom.
By stockpiling, the current environment for contractors should feel stable. But now is also the time to communicate openly with project owners about potential cost increases. These may stem not only because of tariffs, but because of lack of skilled labor and other economic factors.
Changes to federal immigration policy have already affected construction planning as an estimated one in five construction workers in the U.S. lack permanent legal status, according to The Wall Street Journal. Construction companies should begin coordinating with risk, legal, human resources and financial advisors right now to get a full picture of competitive risk in 2026 and beyond.
Insurers, agents and brokers can also provide valuable insights into contract terms that may be changing. In particular, escalation clauses, whether driven by project owners or contractors, warrant renewed attention in light of ongoing trade and economic events.
3. Tap Into Growing Industries
Construction firms tend to be more successful when they establish a niche in certain project areas and build a reputation for their expertise. However, during periods of global or economic uncertainty, it’s wise to explore industries that are actively investing in new projects to maintain their competitive edge.
As of mid-2025, those industries included:
• Technology: North America’s four largest data center markets (Northern Virginia, Chicago, Atlanta and Phoenix) increased 43% year-over-year during 2025’s first quarter, outpacing growth in Europe, Latin America and Asia-Pacific.
• Healthcare: Hospitals, clinics and other medical facilities are trying to extend patient reach despite budgetary and staff challenges, so they’re putting brick-and-mortar operations closer to patients.
• Infrastructure: Projects related to transportation and other public needs should proceed based on continuing funding, but construction leaders should evaluate how the administration plans to budget for transportation upgrades, federal facilities, schools and other projects.
• Manufacturing: Construction leaders should keep an eye on auto, semiconductors and battery industries to see how their construction needs may change. The tariff policy won’t cause all imports to be produced domestically, but it may impact some decisions on where to locate production.
4. Invest in Resilience
Current and future trade and geopolitical events will require companies to adapt quickly to manage rising costs, navigate market turbulence and capitalize on emerging opportunities.
Here are key strategies to consider across technology, labor and risk management:
• Evaluate internet of things (IoT) technologies to prevent health, transportation and operating risks.
• Reassess hiring and retention practices to attract and keep skilled talent.
• Improve data capabilities inside the business and at every worksite to boost profitability on every job.
Not every investment will suit every business. Today, labor and environmental risks are likely to increase. New solutions are emerging daily to help tackle those concerns by controlling construction costs and improving productivity.
Scott Schultz is chief underwriting officer of construction for The Hartford, a member of multiple AGC chapters. Michael Wolf is principal U.S. economist for The Hartford’s Global Insights Center, an exclusive research hub offering analysis on macroeconomics, geopolitics, and sectoral risks.