SMACNA Contractors Should Be Prepared for More Tariffs

For those of us following the recent news regarding U.S. tariffs, you may be experiencing whiplash.  On Saturday, February 1, 2025, President Trump announced a 25% tariff on imports from Mexico and Canada.  Additionally, President Trump announced a 10% tariff on goods from China.  Two days later, on Monday, February 3, President Trump announced that he would delay imposing tariffs on Mexico and Canada for 30 days based on agreements he reached with the leaders of those countries.

Regardless of the back-and-forth, SMACNA contractors should be taking steps now to prepare for the cost increases and construction delays that result from U.S. tariffs.  Provided below are answers to frequently asked questions regarding tariffs and how SMACNA contractors can prepare for the new tariff landscape.

What is a Tariff?

A tariff is a tax imposed by one country on goods imported from another country.  Tariffs are collected at the ports where the goods enter the country.  While tariffs can be avoided by purchasing goods from domestic sellers, that is not always possible.

Many goods frequently used by SMACNA contractors are procured from outside of the U.S.  For example, steel, aluminum, fasteners, manufactured components, and HVAC units are frequently sourced from outside of the U.S.  Thus, for example, a 25% tariff on aluminum imported from Canada would significantly alter the bid and cost structure for a SMACNA contractor installing the HVAC duct in a new office building.  So, too, would a 10% tariff on fasteners and HVAC parts imported from China.

Can the President Impose Tariffs?

While the U.S. Constitution entrusts Congress, and not the President, with authority over U.S. tariffs, Congress has delegated its authority to the President in some cases.

For example, Section 232 of the Trade Expansion Act of 1962 (“Section 232”) empowers the President to impose tariffs on certain goods if they threaten “national security.”   Likewise, Section 301 of the Trade Act of 1974 (“Section 301”) empowers the President through the Office of the United States Trade Representative (“USTR”) to impose trade sanctions on foreign countries that violate U.S. trade agreements or engage in acts that are “unjustifiable” or “unreasonable” and burden U.S. commerce.

During the first Trump administration, President Trump used Section 232 to impose tariffs on steel (25%) and aluminum (10%) imports from most countries.  President Trump also used Section 301 to impose tariffs targeting Chinese goods, covering a wide range of imports totaling approximately $370 billion.

What Can We Expect under Trump 2.0?

While goods from China appear to be the main target of President Trump’s tariffs, other countries, including Canada and Mexico, appear to be under scrutiny as well.  

As noted above, on February 1, 2025, President Trump announced a 25% tariff on imports from Mexico and Canada only to delay the tariffs two days later for 30 days.  Whether the parties will be able to reach an agreement before March 3, 2025, remains to be seen.  At a minimum, contractors should be aware that there will be more uncertainty regarding tariffs and that they should take steps to prepare.

Remember, too, in July 2020, the United States-Mexico-Canada Free Trade Agreement (USMCA) went into effect, replacing NAFTA.  When negotiating the USMCA, the Trump administration insisted on including a sunset/review clause in the treaty, allowing the United States to either further negotiate provisions, or end the treaty altogether. The review clause provides that the parties will review the treaty prior to the deadline, and on July 1, 2026, the United States, Mexico and Canada will confirm in writing whether to continue the agreement.  This may provide for additional fireworks as the parties negotiate whether to modify or even continue the USMCA.

How Can SMACNA Contractors Prepare?

At this point, uncertainty regarding tariffs appears to be the only certainty.  As a result, SMACNA contractors should be taking steps now to mitigate the impacts of tariffs on construction-related imports.  For example, SMACNA contractors should consider any of the following actions: