{"id":905392,"date":"2026-02-25T14:52:04","date_gmt":"2026-02-25T21:52:04","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=905392"},"modified":"2026-02-25T14:52:06","modified_gmt":"2026-02-25T21:52:06","slug":"tariff-volatility-contract-drafting-procurement-strategies","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/tariff-volatility-contract-drafting-procurement-strategies\/","title":{"rendered":"Managing Tariff Volatility in Cross\u2011Border U.S. Construction Projects: Practical Contract\u2011Drafting and Procurement Strategies"},"content":{"rendered":"\n

Sara Beiro Farabow and Michael Wagner, Jr. | Seyfarth Shaw<\/a><\/p>\n\n\n\n

Volatile U.S. tariff<\/a> announcements continue to affect international supply chains for U.S. construction projects. Although recent litigation has centered on the scope of presidential tariff authority rather than construction\u2011specific disputes, these decisions carry important implications for how parties structure risk in their contracts. In May 2025, the U.S. Court of International Trade (CIT) struck down certain \u201cLiberation Day\u201d tariffs as exceeding presidential authority under IEEPA. A federal district court in Washington, D.C. likewise issued a preliminary injunction suspending related tariffs\u2014though it later stayed its own order pending appeal. And the Supreme Court has agreed to review cases addressing the legal limits of IEEPA\u2011based tariffs.<\/p>\n\n\n\n

While none of these developments arises from construction disputes, the themes they highlight\u2014timing, statutory authority, and documentation<\/strong>\u2014mirror the issues encountered when tariff conditions disrupt international procurement. The following strategies reflect practical steps U.S. project owners, contractors, and foreign suppliers can take to mitigate risk, drawing on drafting approaches now widely used across major construction forms, including\u2014but not limited to\u2014modified AIA agreements.<\/p>\n\n\n\n

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1. Strengthen Contract Provisions to Manage Tariff\u2011Driven Cost Escalation<\/strong><\/h4>\n\n\n\n

Clarify Escalation and Cost\u2011Sharing Models<\/strong><\/p>\n\n\n\n

Many construction contracts include capped risk\u2011sharing structures<\/strong> to address material cost volatility. Contractors typically absorb cost increases up to a negotiated threshold\u2014often 10\u201315%\u2014after which owners share or assume the excess, subject to notice and documentation requirements. This remains one of the most balanced approaches to addressing tariff unpredictability.<\/p>\n\n\n\n

Contracts also increasingly include pricing trigger ranges<\/strong> (commonly \u00b15\u201310%) requiring the parties to reassess pricing when material costs shift beyond agreed bands.<\/p>\n\n\n\n

Use Precise, Timing\u2011Based Tariff Definitions<\/strong><\/p>\n\n\n\n

Construction contracts must also take into account tariff effective dates, specifying that tariff\u2011related relief applies only to tariffs enacted after<\/strong> the contract\u2019s effective date.<\/p>\n\n\n\n

Balance Escalation With Savings Provisions<\/strong><\/p>\n\n\n\n

Because some tariffs have been suspended or stayed pending appeal, well\u2011drafted contracts\u00a0now include<\/a>\u00a0savings provisions<\/strong>\u00a0requiring parties to share decreases in cost when tariff\u2011related prices fall. This symmetry promotes fairness and reduces disputes as markets stabilize.<\/p>\n\n\n\n

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2. Refine Risk Allocation Across Interlocking Contract Clauses<\/strong><\/h4>\n\n\n\n

Tariff\u2011related risk is typically spread across multiple provisions\u2014not just escalation clauses.<\/p>\n\n\n\n

Guaranteed Maximum Price (GMP) Contingency Language<\/strong><\/p>\n\n\n\n

On GMP projects, contractors often negotiate the right to use contingency funds for tariff\u2011related cost increases. Owners typically limit such use to non\u2011contractor\u2011caused events. Clear drafting reduces later disagreement over whether contingency use was appropriate.<\/p>\n\n\n\n

Buyout and Price\u2011Hold Requirements<\/strong><\/p>\n\n\n\n

Volatile tariff timing has led some subcontractors to resist long price\u2011hold periods. Contracts should address how design development, delayed notices to proceed, or owner\u2011driven sequencing changes affect suppliers\u2019 pricing obligations.<\/p>\n\n\n\n

Tailored Delay Provisions<\/strong><\/p>\n\n\n\n

Tariff\u2011driven procurement delays may be treated as excusable (but not necessarily compensable)<\/strong>. Expressly identifying tariff\u2011related disruptions as potential causes of excusable delay promotes clarity without overreliance on force\u2011majeure provisions\u2014which courts interpret narrowly.<\/p>\n\n\n\n

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3. Mitigate Procurement Exposure Through Early Planning and Supplier Engagement<\/strong><\/h4>\n\n\n\n

International commentary notes that sudden tariff changes can significantly disrupt supply chains, especially in industries dependent on imported steel, aluminum, and specialty components. For construction projects with cross\u2011border material dependencies, the following steps can reduce exposure:<\/p>\n\n\n\n