This article was co-authored by Riccardo Del Vecchio, Partner, and Michael Fazzari, Associate from Miller Thomson LLP.
Steel tariffs are financial charges imposed by the United States government on steel products imported into the country, requiring foreign steel producers to pay these tariffs when their goods enter the U.S. market.
The primary objective of these tariffs is to increase the cost of imported steel, thereby incentivizing U.S. companies to purchase steel produced domestically. By elevating the price of foreign steel, these tariffs aim to protect and strengthen the domestic steel industry, potentially leading to enhanced production and employment within the sector. However, the increased costs of imported steel can also result in higher expenses for U.S. manufacturers that utilize steel as a raw material, which may in turn lead to elevated prices for consumers.1
The purpose of this article is to examine the historical tariffs imposed by the U.S. government on steel imports and evaluate their impact on various aspects of the construction industry. Additionally, the article will provide best practices related to contract drafting, project record keeping, and dispute resolution strategies to equip stakeholders with resilience against the volatility of current U.S. trade policies.
This publication is a mutual effort between Ankura Consulting Group and Miller Thomson LLP, and is provided as an information service that may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.
History of Tariffs Imposed on Steel by U.S. Presidents
The history of U.S. tariffs on steel products highlights various economic and political strategies employed by different administrations.
In 1930, the Smoot-Hawley Tariff was enacted during the Great Depression. It raised U.S. tariffs on over 20,000 imported goods and was aimed at protecting American businesses and farmers. However, it ended up worsening the global economy by prompting retaliatory tariffs from other countries.
Later on, the Trade Act of 1974 was passed by the U.S. Congress with the purpose of, among others, fostering the economic growth of and full employment in the U.S. and strengthening economic relations between the U.S. and foreign countries through open and nondiscriminatory world trade. This legislation granted the president of the U.S. the authority to negotiate trade agreements.
In 2002, former President George W. Bush imposed tariffs ranging from 8% to 30% on various steel products. These tariffs were intended to protect the U.S. steel industry from a surge in imports. However, the 2002 steel tariffs led to significant economic impacts, particularly resulting in the loss of jobs in steel-consuming industries, which surpassed the jobs created in the steel-producing sector. Steel-consuming manufacturing businesses faced higher input costs and supply shortages, resulting in lost business, reduced employment, and slower economic growth.2
These tariffs were lifted in December 2003, less than two years after being imposed, following a ruling by the World Trade Organization (WTO) that deemed them illegal, coupled with pressure from trading partners.3
More recently, in 2018, President Donald Trump imposed a 25% tariff on steel imports under Section 232 of the Trade Expansion Act of 1962. These tariffs aimed to protect national security and support domestic industries. In mid-2019, tariffs were lifted on Canadian and Mexican imports, and in 2021, the Biden administration ended tariffs on European Union metals to ease trade tensions and improve diplomatic relations with key allies. President Trump's 2018 tariffs resulted in negotiations that replaced the North American Free Trade Agreement (NAFTA) with the United States-Mexico-Canada Agreement (USMCA).
A study published by the United States National Bureau of Economic Research, evaluating the 2018 tariffs, concluded that the U.S. tariffs almost completely passed through to U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers.4
On Feb. 1, 2025, President Trump imposed a sweeping 25% tariff on all Canadian and Mexican steel and aluminum imports. These tariffs were to begin on Feb. 4, 2025, but were suspended for 30 days (only for Canadian and Mexican products). Later, on March 4, 2025, tariffs on Canadian and Mexican goods went into effect, and on March 12, 2025, tariffs on Canadian steel and aluminum went into effect. A 25% tariff on Canadian lumber was set to go into effect on April 2, 2025.
It is worth mentioning that on March 12, 2025, the United States Customs and Border Protection Cargo Systems Messaging Service announced that a 25% import duty would be applied to all imports of steel articles and derivative steel articles from all countries, effective at 12:01 Eastern Daylight Time on March 12, 2025.
While the actual effects of the imposed tariffs are yet to occur and to be studied in full, we aim to provide an evaluation of the possible tariff effects on the construction industry in the following sections:
Potential Impacts on the Construction Industry
Steel tariffs have significant impacts on the construction industry, affecting various aspects such as steel production and manufacturing of derivatives, labor market and wage dynamics, supply chains and project timelines, and overall economic health. When tariffs are imposed, the prices of raw steel and finished products like beams and pipes rise, leading to higher expenses for construction companies and increased project budgets. This, in turn, results in higher costs for clients and consumers.
Additionally, tariffs can cause supply chain disruptions, interrupting established relationships with suppliers and leading to delays and shortages of materials. These disruptions slow down construction projects, extend timelines, and increase labor costs as workers wait for materials to arrive. The ripple effect of higher material costs and supply chain disruptions is felt acutely in project timelines and budgets, squeezing profit margins or forcing companies to pass on the additional expenses to clients. This can make new construction projects less attractive, potentially reducing the demand for new buildings and infrastructure.
Potential Effects of Steel Tariffs on Produced Steel and Manufactured Derivatives Costs
Steel tariffs have distinct impacts on steel production and steel manufacturing, each affecting different aspects of the industry.
When tariffs are imposed, there is often an immediate increase in domestic steel production. U.S. manufacturers ramp up operations to meet the heightened demand, which results from reduced competition from imports. This surge in production is typically accompanied by a notable rise in steel prices, with costs increasing significantly shortly after the tariffs are implemented. Additionally, the steel production sector usually experiences a short-term boost in employment, as the increased demand for domestically produced steel creates more jobs within the industry and within the country.
On the other hand, steel tariffs raise the cost of raw materials for manufacturers, leading to higher production costs.5 This increase in input costs puts U.S. manufacturers at a competitive disadvantage compared to foreign competitors who do not face similar tariffs. As a result, industries that rely heavily on steel as an input, such as construction and automotive, encounter higher costs, which often lead to increased prices for consumers. The higher production costs can also result in potential job losses in steel-using industries, as companies may cut back on production or relocate operations to mitigate the financial impact.
Effects on Labor Market and Wage Dynamics
Steel tariffs can have profound effects on the labor market, influencing both employment levels and wage dynamics across various sectors. When tariffs are imposed on imported steel, domestic steel producers often benefit from reduced foreign competition. This can lead to an increase in production and, consequently, a rise in employment within the steel industry. For example, after the 2018 tariffs imposed by President Trump, U.S. steel manufacturers added approximately 1,000 new jobs as foreign-made steel became more expensive and U.S.-made steel more competitive.6
While steel producers may see a boost, the broader impact on steel-using industries can be negative. Industries such as automotive, construction, and machinery manufacturing rely heavily on steel as an input. The increased cost of steel due to tariffs raises production costs for these industries, which can lead to reduced profitability and potential job losses. In a study published by the U.S. Federal Reserve Board, it was determined that the steel material price increase due to the 2018 steel tariffs resulted in reductions in employment in the manufacturing sector.7
The increased cost of steel can also affect wages. In steel-producing industries, wages might rise due to higher demand for labor. However, in steel-using industries, companies facing higher production costs may cut wages or reduce hiring to maintain profitability. This creates a disparity where workers in steel production might benefit, while those in steel-using sectors face wage stagnation or job insecurity.
Effects on Supply Chain and Project Timelines
Steel tariffs can significantly impact project timelines and supply chains in the construction industry. Tariffs on steel lead to higher prices for raw materials, which directly increase project costs. This strain on budgets can force construction companies to reassess their financial plans and potentially delay projects until additional funding is secured. Additionally, tariffs can cause disruptions in the supply chain, as construction companies may struggle to source sufficient quantities of steel at competitive prices. These disruptions can lead to delays in material delivery, extending project timelines, and increasing labor costs as workers wait for materials to arrive.
The ripple effect of increased material costs and supply chain disruptions is felt acutely in project timelines and budgets. Delays in material delivery due to disrupted supply chains can extend project timelines, meaning construction firms must pay for additional labor, equipment rentals, and other associated costs. The increased costs and delays can lead to budget overruns, further straining financial resources and extending project timelines. In response to higher steel prices, some construction companies may explore alternative materials, which can require redesigns and adjustments to project plans, further delaying timelines.
Best Practices to Equip Stakeholders with Resilience Against the Effects of Current U.S. Trade Policies
Material Cost Escalation
The implementation of tariffs often triggers a swift response in the domestic steel industry. As imports face new barriers, U.S. steel producers seize the opportunity to expand their operations, addressing the gap left by reduced international competition and supply. This shift in market dynamics often leads to significant cost implications as the price of steel tends to climb sharply in the wake of tariff implementation. Price volatility and supply chain adjustment can have far-reaching effects across industries that rely heavily upon steel products, which potentially impacts construction projects.
Alternative material and/or subcontractor supplier substitution: To address the challenges associated with material price escalation, construction contracts can incorporate an appropriate alternative material provision. This type of provision establishes a mechanism allowing parties to suggest substitute materials that match the quality and performance of originally specified products when the cost of those products surpasses a predetermined threshold due to tariffs. Such a provision affords construction stakeholders valuable flexibility in procurement, particularly when tariffs trigger substantial increases in the cost of procuring steel products. To minimize potential disputes arising from tariff-induced changes, construction contracts should clearly define the scope of work and material specifications, allowing for adjustments only under mutually agreed conditions.
Price escalation: In light of potential market volatility due to external factors like tariffs, a well-crafted price escalation provision can provide necessary flexibility in construction contracts. A price escalation provision allows for adjustments to the agreed-upon contract price when supply and material costs increase due to circumstances outside the parties’ control. To address the specific challenges posed by trade policies, price escalation provisions ought to explicitly contemplate the imposition of tariffs as a factor beyond the parties’ control.
Labor Shortage
Construction stakeholders aiming to be proactive in addressing labor supply and shortage issues in the context of a tariff or trade war should be considering — among other things — phasing project schedules to optimize workforce distribution overtime, adjusting construction methods to minimize on-site labor/labor demands and appropriate adjustment clauses for labor shortages, and schedule delays and alternative supply strategies. The reality is that the potential of increased costs, delays, and workforce reductions in the context of a trade war and associated tariffs are catalysts for construction stakeholders to revisit and rethink labor strategies and employ appropriate mitigation strategies, including, but certainly not limited to: assessing the viability of leveraging temporary workers and contract laborers to manage fluctuating workloads, training workers to handle multiple roles to maintain flexibility in the face of staff reductions, and seeking appropriate advice and guidance from strategic partners, involving employment and labor lawyers regarding retention incentives and shorten work weeks or staggered shifts which might entail exploring temporary wage adjustments and reduced hours versus layoffs. The authors encourage collaboration between construction industry stakeholders and groups, including engagement in public/private partnerships to expand the discourse with respect to workplace programs and training grants, immigration and skilled-worker programs, and technology and automation.
Supply Chain Issues and Project Timeline Prolongation
Tariffs imposed on steel products can have profound effects on project timelines and supply chain dynamics with respect to construction projects. Stakeholders in the construction industry may find it challenging to source adequate quantities of steel at competitive prices, resulting in delays to material delivery which may inevitably slow down project timelines.
Supply chain disruption delay provision: To mitigate the risk of project delays on account of supply chain disruptions, stakeholders should consider incorporating a supply chain disruption delay provision into their respective construction contracts. While strategies such as sourcing alternative materials or changing suppliers can help offset the direct cost implications of tariffs, these actions may introduce new scheduling challenges. Typically, contractors develop construction schedules based on specific material procurement lead times. Any deviation from this planned sequence can result in delayed material deliveries, which in turn can push back project milestones.
A well-crafted supply chain disruption delay provision can provide a structured approach to adjusting project timelines in response to such delays.
Conclusion
As described herein, steel tariffs imposed by the U.S. government have historically had a profound impact on the construction industry, influencing material costs, labor dynamics, supply chains, and overall project viability.
To navigate the challenges posed by steel tariffs, construction industry stakeholders must adopt proactive strategies that enhance resilience against fluctuating trade policies. Implementing contract provisions that account for material cost escalation, alternative material substitutions, and price adjustments can help mitigate financial uncertainties. Additionally, addressing labor shortages through strategic workforce planning, training programs, and flexible employment strategies can ensure project continuity despite economic fluctuations.
Moreover, incorporating supply chain disruption delay provisions within construction contracts can provide a structured approach to managing unforeseen delays and cost increases. Collaboration among industry stakeholders — including legal and financial advisors — can further strengthen the industry's ability to adapt to changing trade environments. By implementing these best practices, construction stakeholders can safeguard their projects from the adverse effects of steel tariffs, ensuring stability in an uncertain economic landscape.
This publication is a mutual effort between Ankura Consulting Group and Miller Thomson LLP and is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.
Sources
[1] In reality, while steel-related tariffs are intended to promote a country’s domestic steel industry, such tariffs do not necessarily eliminate the need for imports, for reasons which include, but not limited to, domestic supply limitations and issues regarding specialty steel grade limitations.
[2] The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact During 2002
[3] Dispute DS248: United States — Definitive Safeguard Measures on Imports of Certain Steel Products, Adopted on December 10, 2023, World Trade Organization
[4] THE IMPACT OF THE 2018 TRADE WAR ON U.S. PRICES AND WELFARE, National Bureau of Economic Research, March 2019
[5] Domestic steel producers, facing less competition, often raiser their prices
[6] What happened the last time Trump imposed tariffs on steel and aluminum, Vineet Sachdev and Anurag Rao, Reuters, March 11, 2025.
[7] Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector, Federal Reserve Board, Published December 2019, Revised January 25, 2024.
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© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
