Tariffs, Taxes and Turbulence

With informed planning and strategic flexibility, AEC firms can continue to thrive and deliver, even in turbulent times.

The architecture, engineering, and construction industry has long been vulnerable to global economic forces, but today’s landscape is more volatile than ever. With ongoing shifts in U.S. trade policy, particularly the evolving stance on tariffs, firms across the country are feeling the pressure. While tariffs were once targeted tools of foreign policy, they are now front and center in shaping material costs, project timelines, and business confidence.

Currently, tariffs on imported construction materials such as steel, aluminum, glass, and specialized components are raising costs across the board. For firms that rely on global supply chains or bid on fixed-cost projects months in advance, these unpredictable spikes can wreak havoc on profit margins and project schedules. Since AEC projects are inherently collaborative, these disruptions affect clients, contractors, and consultants alike.

The Challenge of a Constantly Shifting Trade Environment

The reality is: trade policy is changing rapidly. Tariffs are being imposed, lifted, and modified in real time based on global politics, supply chain shifts, and domestic manufacturing agendas. Just this year, we’ve seen new duties imposed on products coming from key trade partners, while others are under review or subject to exemptions.

The challenge? This environment is dynamic and changes almost daily. One day it’s tariffs on Chinese steel; the next, it’s new trade friction with the EU or a shift in domestic manufacturing policy. What we know today may be different next week – and that’s the heart of the issue.

Tariffs introduce uncertainty – and with it, risk. Federal and state agencies may delay or downsize projects amid concerns about budget overruns or shifting economic priorities. Government-funded projects rely on stable material pricing and predictable economic conditions.

Corporate clients might scale back expansion plans, and private developers could become more cautious about launching new office buildings, multi-family complexes, or mixed-use developments. In this environment, firms may need to diversify their service offerings, focus on renovation and adaptive reuse projects, or shift attention to more resilient market sectors to maintain steady work.

For the industry, this means adapting designs to accommodate rising costs, managing client expectations, and navigating pricing volatility with suppliers and contractors. Projects already on tight margins may face delays or cancellations, and firms could see increased pressure to value-engineer or redesign around fluctuating material availability.

Building Resilience: How to Respond to Volatility

So how can you combat this uncertainty? The answer lies in agility and informed collaboration. You can:

• Stay informed. Develop a system for monitoring tariff-related news and supply chain disruptions.
• Diversify suppliers. Wherever possible, avoid overreliance on a single country or supplier. A broader network creates flexibility if tariffs change suddenly or lead times spike.
• Revisit contracts. Escalation clauses can help manage costs tied to sudden material price hikes.
• Scenario planning. Model potential material cost increases with your finance team. Prepare for how a 10 percent, 20 percent, or 30 percent change could affect your pipeline.

Whether these proposed tariffs materialize or not, the conversation highlights how deeply global trade policy is woven into the business of building.

For architects, engineers, and contractors, it’s another reminder that projects don’t happen in a vacuum – they are shaped by the economic, political, and material realities of the moment.

The Tax Debate and What Comes Next

Tariffs aren’t the only moving target. The upcoming tax debate in Congress is another critical area that could significantly impact the AEC industry.

Congress has officially launched the process to draft a major new tax package. The House and Senate have approved a budget resolution, authorizing the House Ways and Means and Senate Finance Committees to begin writing the bill.

But they’re not working alone – other committees are shaping areas like defense, border security, and proposed cuts to mandatory spending. Those cuts are expected to be a key point of contention, with more support in the House than in the Senate.

The Ways and Means Committee is currently aiming to mark up the bill in early May. What comes out of that process could significantly affect AEC firms – especially those structured as pass-through entities or planning capital investments.

Meanwhile, the debt ceiling remains a wild card. The Treasury is assessing incoming tax revenues to determine when borrowing authority will run out. A standoff on this front could stall the tax bill or lead to significant compromises.

Next steps

Your reaction is key. Stay informed and stay nimble. Policy shifts – on tariffs, taxes, and spending – aren’t just background noise; they’re levers that can affect profitability, hiring, and the pace of project delivery.

Keep a pulse on Washington. Talk to your advisors. And when possible, make your voice heard – through professional associations, local chambers, and industry coalitions.

Uncertainty isn’t going away – but with informed planning and strategic flexibility, AEC firms can continue to thrive and deliver, even in turbulent times.

We’ll continue to track these developments and what they mean for the AEC industry. Reach out to our team anytime – we’re here to help.