Businesses of all kinds throughout Tennessee and the rest of the country that depend on raw materials and products from other countries have been seriously affected by the uncertainty around tariffs this year. This uncertainty and the ever-changing messages about tariffs on particular countries coming from Washington has caused some overseas companies to curtail exports to the U.S.
Construction businesses are especially vulnerable to tariff increases and uncertainty. Drafting contracts and even providing estimates can be particularly difficult when you don’t know how much supplies will cost or even whether they’ll be available.
Some construction professionals are dealing with this unpredictability by including language about it in their force majeure clauses. We discussed these clauses recently, but not how they can be used to address tariff uncertainty.
What kind of language should be included?
A Harvard Business Review article published earlier this year recommended some ways to do this. They include adding language addressing the following:
- Thresholds for tariff increases (like anything over 10%) that will require the parties to share the added cost.
- A “should-cost” provision to “base contracts on expected costs with predefined price variation triggers, ensuring suppliers don’t exploit tariff hikes for excess profits.”
- “Material changes in trade policy or tariffs.”
Construction businesses don’t always have to be at the mercy of sudden and unexpected tariffs. Having alternative sources (from domestic and international businesses) for resources can help, for example.
Addressing the ever-changing challenges of working in the construction industry, like tariff uncertainty, is just one reason why no party to a construction contract should go it alone in drafting, reviewing, negotiating or enforcing it. Having experienced legal guidance can help you protect your rights and your business.
