April 5, 2025 was a seminal day for both the construction industry and the Trump Administration. It was the day reciprocal tariffs on widely used construction materials were to go into effect. The Trump Administration’s stated goals for the reciprocal tariffs are (i) rebuilding the United States’ manufacturing base (including the defense industrial base), (ii) re-establishing reciprocity in trade with foreign counties, and (iii) forcing trading partners to re-evaluate non-tariff barriers to U.S. exports.
However, the Trump Administration issued a 90-day pause on the reciprocal tariffs on April 9, 2025 to give countries a chance to negotiate more favorable trade terms.
Given the pace of executive action, and the pause on reciprocal tariffs, many companies are wondering: what tariffs are in place, what do they apply to, what are the rates, and how can they minimize the anticipated increase in prices?
The Gray Reed Construction Practice Group answers some of the most popular questions below. Because American tariff policy dates back to 1789, this article is not intended to be an exhaustive academic treatise but instead a helpful overview of where things stand as of May 7, 2025. Please don’t hesitate to reach out if you or your business have a specific question about responding to price increases.
What is a tariff?
A tariff is a tax levied on imported goods and services.
Who has the authority to impose tariffs??
Based on several pieces of legislation passed by Congress, and a series of United States Supreme Court decisions interpreting those acts, the President has wide latitude to impose and set tariff rates on imported good in order to:
- Protect national security: Section 232 of the Tariff Expansion Act of 1962 gives the President broad authority to impose trade restrictions—such as tariffs or quotas—on imports that threaten national security. The U.S. Department of Commerce investigates, submits a report to the President if it determines there is a threat, and the President has the authority to implement tariffs, quotas, or other trade restrictions on the import. The Trump Administration’s tariffs on steel and aluminum have been applied under Section 232.
- Protect domestic industry: Section 201 of the Trade Act of 1974 allows the President to impost temporary trade restrictions—such as tariffs or quotas—on imports that are found to cause serious injury to a domestic industry, regardless of whether the imports are fairly traded. Section 201 has limits on rate increases and duration and is driven by an investigation conducted by the U.S. International Trade Commission instead of the U.S. Department of Commerce. The Trump Administration’s tariffs on solar panels, washing machines, and other higherer end products have been applied under Section 201.
- Address trade agreement violations and other practices: Section 301 of Trade Act of 1974 empowers the President toenforce trade agreements and address unfair foreign trade practices by authorizing retaliatory action, such as tariffs or import restrictions. The investigation is led by the U.S. Trade Representative and a recommendation is made to the President if they find “unjustifiable, unreasonable, or discriminatory” practices. The Trump Administration’s tariffs on Chinese imports, including electric vehicles, batteries, steel, and aluminum have been applied under Section 301.
How are they applied?
The U.S. Department of the Treasury is charged with establishing regulations on the collection of tariffs and U.S. Customs and Border Protection (“CBP”) administers those regulations at U.S. ports of entry.
When a good enters a U.S. port of entry, it is classified and tariffs are assessed using the Harmonized Tariff Schedule of the United States, a collection of tariff rates based on a globally standardized name for a good.[1] Importers self-classify and declare the value or quantity of their goods. CBP reviews the paperwork, performs occasional audits, and then collects any applicable tariffs or penalties as well as any administrative fees. Finally, CBP deposits any revenue from tariffs or other penalties into the General Fund of the United States.
This process is summarized in the graphic below:
What are the current rates for common construction materials?
While the rate and application of certain tariffs remains fluid, the table below shows several examples of the applicable tariffs on common construction goods and materials as of May 7, 2025:
| Construction Material/Country of Origin | General Tariff Rate (as of May 7, 2025) | Examples | Notes |
| Universal Tariff | 10% (in addition to any other applicable tariff) | All goods entering U.S. | Does not apply to goods imported from Mexico and Canada subject to USMCA. |
| Imports from People’s Republic of China | Up to 145% | All goods imported, including, but not limited to, plywood, electronics, apparel, home goods, automotive parts. | There is no longer a ‘de minimis’ exemption for goods valued at under $800. |
| Steel (and derivative products) | 25% | sheet pilings, rail parts, multiple categories of tube/pipe fittings, buildings, tanks/vats/casks, wire/rope/cable, barbed wire, nails/tacks, screws/bolts, pins and needles, radiators, sinks and basins, elevator parts, bulldozer blades, front-end loaders, rooters, rock cutters; plows (and parts), electrical conduit tubing | Globally applied, discards previous deals and exclusions |
| Aluminum (and derivative products) | 25% | windows/doors/frames, ladders, hinges, motor vehicle/building/other mountings/fittings, door parts, frames and mirrors (and parts), several categories of mechanical and electrical machinery | Global applied, discards previous deals and exclusions |
| Lumber (Canada) | 14.38% (may increase to 39.5% in the fall) | Softwood lumber | This solely relates to lumber imported from Canada. But broader tariffs on lumber and timber imports, and an increase of the tariff on Canadian lumber, may be possible in November 2025 at the conclusion of an investigation ordered by the President. |
| Gypsum | 25% (Mexico and Canada) 145% (China) | Gypsum wallboard, drywall, plasterboard, ceiling tiles | 71% of the U.S.’ gypsum imports originate in Mexico. |
| Appliances (Mexico and Canada) | 25% | Refrigerators, freezers, ranges, cooktops, ovens, dishwashers, washers, dryers, motors, compressors, water filtration systems |
How can your company respond to potential price escalations?
There are several ways your company can prepare and respond to escalations in prices for materials and goods. Chief among those is incorporating a price escalation clause into future agreements. Price escalation provisions are critical in construction contracts and allow for price adjustments based on predetermined factors. This clause helps protect contractors and suppliers from cost increases while providing end users with predictability and transparency. Typically, a price escalation provision will include:
- Trigger events that initiate the price adjustment (time-based, index-based, or event-based);
- Calculation methodology specifying the formula used to determine increases;
- Caps and floors to limit extreme fluctuations;
- Notice requirements detailing when and how price changes must be communicated; and
- Dispute resolution mechanisms to address disagreements about adjustments.