During his first administration, President Trump invoked Section 232 of the Trade Expansion Act to impose tariffs on steel and aluminum imports into the United States. The reasoning was that these imports threatened national security by weakening domestic production capabilities and undermining industries crucial to defense and infrastructure. In early 2025, the federal administration reinstated a blanket 25% tariff on steel. It increased the aluminum tariff from 10% to 25%, replacing the modified tariff-rate quotas and exemptions implemented in recent years with a uniform policy across all steel and aluminum imports.
On March 13, 2025, U.S. Customs began collecting the full tariff on every shipment of steel or aluminum entering the country. Steel markets reacted first, with the producer price index (PPI) for cold-rolled steel sheets and strips jumping 9.4 percent monthly. Aluminum moved more quietly but substantially.
While a recent federal court ruling blocked some trade-related tariffs under the International Emergency Economic Powers Act (IEEPA), the steel and aluminum tariffs discussed here remain in effect, as they fall under Section 232 of the Trade Expansion Act.
Surety Bond Professionals is a family-owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.
Construction Feels the Impact First
Steel and aluminum together account for 15%-30% of a typical U.S. building’s direct material budget, and contractors cannot easily substitute other materials without redesigning. In early May, the Associated General Contractors of America (AGC) warned that tariffs on these metals would drive up construction costs and cause project owners to put plans on hold. This warning comes at a time when infrastructure projects funded under the Infrastructure Investment and Jobs Act and Inflation Reduction Act are locked into budgets developed prior to the reinstatement of tariffs during Trump’s second term. Consequently, many contractors are now dipping into contingency funds or asking for scope reductions.
Supply Chain Side Effects
Lead times, the hidden cost driver, have lengthened again. For example, fabricators in the Midwest report a lead time of 16-18 weeks for wide flange beams compared to 10 weeks in early February 2025. And import alternatives that once supplemented domestic production now come with a 25% premium plus duties on downstream fabrication. On the aluminum side, extruders depending on billet from Canada or Bahrain report spot surcharges of 8-12 cents per pound and warn of summer allocation systems that will lengthen lead times.
The White House argues that the pain is short-term, as increased utilization of domestic steel and aluminum will encourage the expansion of U.S. mills. But significant increases in domestic production are unlikely to occur before late 2026 or 2027.
A Cloudy Demand Picture
The World Steel Association postponed its April ShortRange Outlook, blaming the delay on U.S. tariff policy. Its April 2024 forecast projected a 1.2% rise in global steel demand in 2025, led by India and U.S. infrastructure projects. Since then, the demand picture has been clouded by uncertainty, as some private projects pause and public-sector buyers renegotiate due to the price impact of tariffs that went into effect in May.
Contractor Strategies for 2025
No single strategy can erase the impact of a 25% tariff, but a layered defense can help ease the pain. Here are some viable options for contractors.
- Strengthen contractual shock absorbers. Include clauses for contract escalation (“time and price impacted material”). Also, include steel/aluminum allowance and contingency language. The unused allowance reverts to the owner if tariffs are listed (or a product exclusion is approved). If prices rise, it can be topped up from the owner’s contingency without a formal change order. Establish unit price alternates, particularly for heavy civil jobs with uncertain tonnages. Quote a base tonnage at today’s price and a menu of add/delete unit prices that float with an agreed-upon index. This keeps bids competitive while protecting both sides from wild quantity swings.
- Buy earlier, buy smarter. Contractors who front-load procurement and warehouse the material in third-party yards near the jobsite are finding that the math works in their favor, despite higher carrying costs.
- Vendor-managed inventory (VMI). Larger contractors have negotiated VMI programs in which the service center holds tariff-paid inventory under the contractor’s part number but on the vendor’s balance sheet until it is called off. That slashes the hit on the general contractor’s working capital hit and keeps fabrication queues flexible.
- Diversify and document supply chains. In 2025, lead times between domestic mills can vary by as much as five weeks. Establishing long-term relationships with mills that favor customers offering multi-year offtake volume can help shorten lead times. However, bear in mind that contractors must keep a digital chain of custody inside their materials management platform.
- Reengineer the design to use less metal. Hybrid structural systems can shave 8-15% off total steel tonnage. The extra design cost should be offset by cutting the tariff that would otherwise be charged on every diverted ton.
- Industry advocacy and intelligence sharing. The AGC, the Associated Builders and Contractors (ABC), and local building exchanges are running monthly webinars on tariff relief, tariff rate quota (TRQ) utilization, and the Section 232 exclusion portal used to submit requests for exclusions from the tariffs on steel and aluminum imports. Contractors contributing live buying data get early warnings of mill outages and quota hits, letting them pivot before the next price spike.
These are only some of the strategies being used successfully to lessen the impact of high tariffs on imported steel and aluminum. Contractors who embed these practices into their standard operating procedures are proving that it’s possible to maintain margins even in a tariff-stressed 2025 market.
Don’t Overlook Surety Bonds Amid Market Volatility
As steel and aluminum prices continue to fluctuate and lead times stretch, surety bonds will remain the most important tool contractors have to protect all parties on a project. In some cases, bid bonds are being reevaluated carefully by underwriters and contractors who show they have smart procurement practices and can adapt. Because of this, they will have more chances to secure bond terms.
Furthermore, performance bonds guarantee that work will be completed even if a contractor faces cash flow problems due to rising steel or aluminum costs. Payment bonds ensure that subcontractors and suppliers—especially those impacted by longer procurement windows—still get paid on time.
To learn more about how recent years of material shortages have reshaped construction risk, read our blog on material shortages for 2023.
Call Us Today
Our surety bond professionals will help you grow your revenue by maximizing your surety capacity. Call us today!
