Authors: Giovanni Ruscitti, Ruwendika Cookie Desilva, Scott Knight, Dillon Lucas, and Staff Writer Heidi Potter
Since taking office in January of 2025, President Trump has issued a series of Executive Orders and memoranda, which may have a significant impact on the construction industry. Construction industry professionals need to be aware of the changing political and regulatory climate and should be taking proactive steps now in anticipation of these changes. This article identifies five key changes to be aware of:
Tariffs
Immigration Reform
Regulatory Reform
Government Funding
Taxation
This article also discusses the potential impacts of these five changes on the construction industry and highlights things contractors can do to manage costs and mitigate risk.
Tariffs
Background
The Trump administration has issued a flurry of Executive Orders in 2025 imposing tariffs on imports which directly affect the construction industry. A tariff is effectively a tax on imported goods. The roll out and revocation of these tariffs has created confusion and uncertainty. As of March 12, 2025, the Trump administration has implemented: (a) a 25% no-exclusions steel and aluminum tariff on all steel and aluminum imported into the U.S. from other countries; (b) a 20% tariff on all imports from China; and (c) a 25% tariff on certain imports from Canada and Mexico, which are currently scheduled to expand to all imports from those countries starting on April 2, 2025. Additional and increased tariffs are likely in the event of an escalating trade war.[1]
Anticipated Impacts
The new tariffs implemented by the Trump administration are anticipated to increase the cost of essential building materials such as steel, aluminum, lumber, lime, and gypsum (used for drywall), which are primarily imported from Canada and Mexico. Many project materials, including steel, are also sourced from China. These increased costs are typically passed on to the consumer. As a result, increased costs will either be borne by the contractor or passed on to the project owner. In addition, tariffs are expected to lead to project delays. With national disasters such as the recent California fires, supply chains are already experiencing disruptions. Tariffs may further disrupt already unstable supply chains—all of which are anticipated to cause project delays. Due to cost increases and market uncertainty, projects that have not started yet or are early in the construction process may be canceled or stopped.
What to Do Next | Existing Projects
On existing projects, review all contracts for the following terms and conditions, which may provide schedule and/or cost relief for contractors:
Force Majeure Clauses
Tariffs may be addressed in a contract’s force majeure clause and may provide for schedule relief. Evaluate all force majeure clauses in existing contracts to see if they entitle the contractor to time extensions or delay-related cost relief.
Material Escalation Clauses
Review all contracts for material price escalation clauses. These clauses typically allow for contract price adjustments if material costs increase significantly due to tariffs. They ensure that contractors are not unfairly burdened by unexpected cost increases and provide a mechanism for fair cost allocation.
Change-in-Law Clauses
Determine if active contracts have a change-in-law clause. Tariffs imposed after a contract is executed may be treated as a change in law, allowing contractors to seek compensation for increased costs.
Excusable Delay Clauses
Look for excusable delay clauses in existing contracts. Contractors may be able to argue that tariff-induced delays qualify as excusable delays, protecting them from penalties and potentially allowing for time extensions or compensation.
No-Damages-For-Delay Clauses
Review contracts for no-damages-for delay clauses which prohibit contractors from seeking monetary compensation for delays or limit the remedy for a delay to a time extension.
Cost Reimbursement Clauses
On federal cost-reimbursement projects, contractors may be able to recover tariff-related costs if they are allowable, allocable, and reasonable. Note that documentation, such as invoices and proof of tariff imposition, must be submitted for approval by the contracting officer.
FAR 52.229-3 Provisions
For federal contracts, contractors should look for references to or the inclusion of FAR 52.229-3. This regulation permits price increases in the amount of any after-imposed Federal tax, so long as it wasn’t included in the contract price as a contingency reserve or otherwise and may provide a mechanism for cost increases resulting from the new tariffs.
Economic Price Adjustment (EPA) Clauses
In federal contracts, look for an EPA clause or reference to FAR 52.216-4, which allows for the negotiation of a price adjustment after notice of a price change and may help mitigate cost increases resulting from tariffs. If any contracts include an EPA clause, be sure to look for a prescribed period in which notice is required. Additionally, these clauses may include a cap on the aggregate of increases from the original price.
Also, consider taking advantage of:
Prompt Payment Laws
Many states have prompt payment statutes that ensure contractors receive timely payment for work performed, even when disputes arise over tariff-related cost increases. Review the project contract to determine what state law applies and determine whether the identified state has prompt payment laws which may apply.
The Doctrine of Impossibility and Impracticability
Under the legal doctrines of impossibility and impracticability, contractors may argue that excessive cost increases caused by tariffs make performance impractical or impossible as originally planned. While challenging to prove, these arguments can be effective in extreme cases.
What to Do Next | Future Projects
On future projects, it is important to include contractual risk-shifting clauses that help mitigate the impact of tariffs. Specifically, contractors should negotiate for the incorporation of contractual language that explicitly identifies government-imposed tariffs as a force majeure event that entitles the contractor to time extensions or delay-related costs.
In addition, consider negotiating for terms that allow longer lead times to avoid delays, provide flexibility when material and subcontract pricing increases, and address the prospect of subcontractors reneging or delaying delivery of materials. Contractual language should expressly provide for schedule and cost relief whenever possible.
To that end, consider including the clauses listed in the foregoing section above, such as force majeure clauses, material price escalation clauses, excusable delay clauses, and cost reimbursement clauses. Avoid no-damages-for-delay clauses, if possible.
Also, consider taking the following steps to mitigate risks as well:
Conduct a Cost Analysis
Analyze the effect and monetary impact of tariffs on the contractor’s business.
Diversify Supply Chains
Consider diversifying material suppliers and supply chains to decrease reliance on imports from Canada, Mexico, and China.
Utilize Foreign Trade Zones
Foreign trade zones allow businesses to bring imports into designated areas without paying duties or tariffs until the goods enter U.S. commerce.
Prioritize Domestic Sourcing
Consider buying building materials sourced in the U.S. as they will not be subject to tariffs; but, be wary of increased demand and potential shortages.
Buy in Bulk
Buying materials early in the construction process and in bulk may help mitigate price increases.
Negotiate with Suppliers
Negotiate with suppliers early and try to lock in prices before they escalate further. Strengthening relationships with suppliers is also advisable.
Secure Subcontractors Early
Consider securing subcontractors early to lock in prices and negotiate contract provisions that mirror those in the prime contract so that all parties are aligned.
Strengthen Business Relationships
Take steps to strengthen business relationships with owners, subcontractors, and suppliers to increase transparency and mitigate the risk of surprise.
Notify Stakeholders
Follow the contractual notice requirements and processes closely when notifying owners and upstream contractors of any intention to seek price and schedule changes.
Stay Informed
Task staff or management with staying up to date with political and legal developments and have a team ready to respond to changes as they arise.
Don’t Panic
Above all, do not panic. Seek advice from legal counsel as well as financial advisors and be prepared to weather the short-term volatility and economic impacts caused by new and increased tariffs.
Immigration reform
Background
On January 20, 2025, President Trump signed several executive orders changing the immigration landscape that contractors need to be aware of. Those orders challenge birthright citizenship for children born to undocumented parents, expedite the removal of undocumented workers without a court hearing, allow the Department of Homeland Security to authorize state and local law enforcement officials to investigate, apprehend, and detain individuals illegally residing in the U.S., declare a national emergency at the southern border to prohibit any person from entering the U.S. (including asylum seekers), prohibit family reunification, and threaten federal funding for state and local jurisdictions that provide sanctuary to immigrants.[2]
Anticipated Impacts
It is estimated that between 25% and 30% of construction industry workers are immigrants. Consequently, the Trump administration’s immigration policies and procedures are expected to disproportionately affect the construction industry and could have significant impacts. Construction industry professionals should expect:
a. increased I-9 Audits by U.S. Immigration and Customs Enforcement (ICE);
b. worksite enforcement actions;
c. labor shortages due to increased deportations and restrictive policies;
d. increased wages for lower-skilled workers and, in turn, increased construction costs; and
e. project delays due to labor shortages, which may expose contractors to liquidated damages and other contractual penalties.
What to Do Next | Existing Projects
On existing projects, review all contracts for the following terms and conditions to understand risks related to immigrant labor and/or which may provide schedule or cost relief for contractors resulting from labor shortages:
Labor Provisions
Evaluate existing contracts to understand any contractual obligations related to workforce citizenship and immigration requirements, including potential exposure in the event of an ICE raid.
Force Majeure Clauses
Review the force majeure clause in existing contracts to determine if it entitles the contractor to time extensions or delay-related cost relief based on “labor disruptions” or “labor shortages.”
Change in Law Clauses
Determine if active contracts have a change in law clause which would treat Trump administration immigration policy reforms after a contract is signed as a change in law, allowing contractors to seek compensation for increased costs.
Excusable Delay Clauses
Look for excusable delay clauses in existing contracts. Contractors may be able to argue that delays caused by changes in the law qualify as excusable delays, protecting them from penalties and potentially allowing for time extensions or compensation.
No-Damages-For-Delay Clauses
Review contracts for no-damages-for-delay clauses which prohibit contractors from seeking monetary compensation for delays or limiting the remedy for a delay to a time extension.
In addition, contractors should consider taking the following actions:
Designate a Response Team
Identify a primary contact within the organization who will handle communications with ICE during a raid. This person should be trained on legal rights and responsibilities during such encounters.
Employee Training
Train workers on how to respond if ICE officers approach them. Inform your workforce about their rights during an ICE raid. Employees should know they have the right to remain silent and request legal representation if approached by ICE agents. Advise employees to carry documents proving their lawful status in case authorities stop them. Consider downloading red cards at https://www.ilrc.org/red-cards-tarjetas-rojas and provide them to workers. These cards give examples of how workers can exercise their rights in real situations.
Conduct an Internal I-9 Review
Review all employee I-9 forms for accuracy and compliance. Ensure that records are maintained properly for both current and former employees. Make sure that all I-9 forms are complete, accurate, and organized in order to find and correct deficiencies before ICE does and to be able to quickly provide completed forms if requested during a raid.
Develop a Raid Response Plan
Create a detailed plan that outlines steps to take if ICE arrives at your job site. This should include:
i. procedures for verifying ICE warrants;
ii. guidelines for employee interactions with ICE agents; and
iii. communication protocols for notifying legal counsel immediately upon an ICE visit.
Conduct I-9 Audits
Within three (3) days of hiring a new worker, conduct an I-9 audit which confirms that person’s eligibility to work in the U.S.
Use E-Verify
If the state in which you are conducting business does not already require it, consider voluntarily using the government’s E-Verify system at https://www.e-verify.gov/ to quickly verify employment authorization and to avoid penalties related to hiring undocumented workers. Note, however, that employers are generally advised against “re-verification” of existing workers as it may result in discrimination claims, decreased morale and productivity, and instill fear.
Join Forces
Consider joining industry associations that lobby for construction-specific visas or exemptions for immigrant workers.
What to Do Next | Future Projects
On future projects, it is important to include contractual risk-shifting clauses that help mitigate the impact of labor shortages, if possible, such as force majeure clauses expressly identifying labor disruptions and labor shortages as an event entitling the contractor to time extensions or delay-related costs.
In addition, contractors should consider taking the following actions:
Manage Risk Through Subcontracts
General contractors should also address immigration and labor issues in their subcontracts and consider including contractual provisions that do the following:
i. require subcontractors to verify each worker is eligible to work in the U.S.;
ii. require rigorous screening processes, including requirements for documentation of workforce eligibility;
iii. allow for immediate termination of subcontractors if unauthorized workers are discovered;
iv. require the subcontractor to indemnify the general contractor for any fines or legal issues related to unauthorized subcontract workers on the projects; and
v. provide for passthrough subcontractor claims to limit liability.
Diversify Labor and Recruitment Efforts
Consider hiring domestic workers and diversify across all demographics and geographies to recruit workers.
Increase Budgets/Contingencies
Increase their budgets and ensure contingency is available if labor shortages arise and increased wages are needed to attract talent.
Be Creative and Innovate
Develop new apprenticeship and training programs designed to address labor shortages.
Implement Retention Strategies
Adopt robust retention strategies which include competitive wages, benefits, and career development opportunities, to help retain workers.
Technology and Automation
Adopt new technologies and automation to reduce the labor intensity of construction projects and increase efficiency.
Regulatory Reform
Background
President Trump has issued a host of memoranda and Executive Orders aimed at regulatory reform (or “deregulation”) which may impact the construction industry. These actions cut a broad swath across all federal administrations and halt or change administrative regulations in the areas of climate change, renewable energy, the environment, federal contracting, labor, and employment, among others.
For example, President Trump issued a memorandum directing “all executive departments and agencies” to stop issuing or proposing “any rule in any manner” until a department or agency head appointed or designated by the President reviews and approves the rule and ordering the withdrawal of any rules that had been sent to the Office of the Federal Register but were not yet published.[3] The President also signed Executive Orders: (a) making significant changes to the federal environmental review processes which are applicable in many construction projects; (b) rescinding apprenticeship mandates or incentives on federal construction contracts imposed by the Biden administration; and (c) rescinding a Biden administration Executive Order incentivizing the adoption of project labor agreements on private, state, and local infrastructure, manufacturing, and clean energy projects.[4]
Anticipated Impacts
The impacts of the Trump administration’s deregulation efforts are difficult to predict. It is anticipated, though, that the overall reduction of federal regulations may streamline federal processes related to environmental projects and requirements and reduce compliance costs for contractors. In addition, changes to labor laws may impact wages, safety standards, and other considerations for the construction industry. Contractors should be mindful, however, that states may introduce or maintain stricter policies, which may cause compliance challenges when operating across multiple states. Furthermore, federal freezes, rollbacks, and ongoing legal challenges may cause uncertainty and result in project delays.
What to Do Next | Existing Projects
Contractors should review existing contracts, particularly for environmental or natural resource development projects, for provisions which allow time extensions or cost relief:
Force Majeure Clauses
Review the force majeure clause in existing contracts to determine if it entitles the contractor to time extensions or delay-related cost relief based on governmental action.
Change in Law Clauses
Look for changes in law clauses in active contracts to determine whether the Trump administration’s executive orders and memoranda entered after a contract is signed may be treated as a change in law, allowing contractors to seek compensation for increased costs.
Excusable Delay Clauses
Look for excusable delay clauses in existing contracts. Contractors may be able to argue that delays caused by changes in the law qualify as excusable delays, protecting them from penalties and potentially allowing for time extensions or compensation.
No-Damages-For-Delay Clauses
Check to see if existing contracts have no-damages-for-delay clauses that prohibit contractors from seeking monetary compensation for delays or limit the remedy for a delay to a time extension.
What to Do Next | Future Projects
As far as future projects are concerned, contractors should consider taking the following actions:
Target Projects that Align with Trump Administration Goals
Identify and bid on federal oil and gas projects and AI infrastructure projects that are more likely to be pursued by the Trump administration.
State Law
As the federal government rolls back federal regulations, contractors need to watch for new state legislation and rulemaking and be familiar with existing state law and regulations that are stricter than federal regulations to maintain compliance.
Be Patient and Stay Compliant
It is likely that many of President Trump’s attempts to reform regulations will result in legal challenges. Thus, it is best to wait until the courts address the administration’s actions before assuming any regulation is added or removed.
Government Funding
Background
The Trump administration’s Executive Order entitled, “Unleashing American Energy,” instructs federal agencies to cease funding environmental and infrastructure projects already initiated under the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA).[5] The freeze affects renewable energy and transportation projects, among others. The funding freeze and refusal to pay contractors for work already performed on federal projects is being hotly contested in court, adding to the uncertainty and ultimate effect of the freeze. The Trump administration has also signaled its intent to redirect and increase spending on the construction of Artificial Intelligence (AI) infrastructure and natural resource extraction and has directed federal agencies to remove regulatory barriers, such as those imposed by the Endangered Species Act and the Clean Water Act to accelerate energy infrastructure projects.[6]
Anticipated Impacts
There are negative and positive impacts from the Trump administration’s actions for the construction industry. On the one hand, contractors are already being denied payment for work they have performed on IRA and IIJA projects and the government is anticipated to issue suspension of work and/or stop work orders on affected projects. These actions could have a significant monetary impact on construction companies with federal contracts and projects. On the other hand, contractors may have the ability to bid for new federal AI infrastructure and oil and gas projects going forward.
What to Do Next | Existing Projects
Contractors should consider taking the following steps to protect themselves if the government issues a Suspension of Work or Stop-Work Order on their existing federal projects:
The Government May Suspend, Stop, or Terminate
Federal regulations permit contracting officers to stop all, or any part, of the work called for by a federal contract for a period of 90 days after the order is delivered to the Contractor and for any further period to which the parties may agree.[7] Federal regulations also generally allow the government to terminate federal contracts for convenience.
Review the Contract
Contractors should review their contracts with legal counsel as soon as a stop-work or suspension order is issued to determine the contractors’ rights and responsibilities under the contract and to identify deadlines and processes that must be followed.
Notify Subcontractors and Suppliers
Be transparent. Contractors should immediately notify subcontractors and suppliers in writing and advise them that a stop-work order has been issued. Provide a copy of the order to those parties as well.
Establish Communication with the Contracting Officer
Contractors should contact the contracting officer issuing the stop-work order right away and develop a rapport and clear lines of communication with the officer.
Mitigate Costs
Federal regulations require that contractors take all reasonable steps to mitigate costs while work is stopped. This may include halting work (including subcontractor work), furloughing employees, and cancelling supply and materials orders among other things; but, these actions must be balanced against the possibility that a contracting officer lifts the order and work must resume.
Document Everything
Contractors should keep track of all cost-mitigation efforts and all costs incurred as the result of a suspension, stop-work order, or termination to support any claim for equitable adjustment or a termination settlement proposal. This includes keeping segregated accounts for idle labor, facilities, materials, overhead, lost profits, and equipment costs.
Review Insurance Policies
Consult legal counsel and review all applicable insurance policies to determine if coverage exists in the event of a stop-work order, suspension, or termination.
Prepare to Resume Work
Formulate a plan for re-mobilization in the event the stop-work order is lifted and work must resume.
Timely Seek Reasonable Equitable Adjustments (REAs)
When work resumes or if a contract is terminated, contractors have the right to seek REAs in the schedule or contract price or both if (i) the stop-work order results in an increase in the time required for, or in the contractor’s cost properly allocable to, the performance of any part of this contract; and (ii) the contractor asserts its right to the adjustment within 30 days after the end of the period of work stoppage; provided, that, if the contracting officer decides the facts justify the action, the contracting officer may receive and act upon the claim submitted at any time before final payment under the contract.
Follow the Termination Settlement Proposal Process
If the contracting officer terminates the contract for convenience of the government, must follow all applicable federal regulations for closing the project down.[8] Contractors must also submit a final termination settlement proposal seeking any part of the amount to be paid or remaining to be paid because of the termination. The final termination is to be submitted “promptly” to the contracting officer using forms provided by the officer promptly, but no later than one (1) year from the effective date of termination, unless the contracting officer extends that period.
Contractors should also consider taking the following steps if their projects are suspended or cancelled:
Financial Evaluation
Conduct a thorough analysis of the impact of suspended or cancelled projects on company finances and act quickly to mitigate losses or obtain funding to address financial losses resulting from the federal spending freeze.
Use Materials and Labor Elsewhere
Evaluate whether materials and labor allocated to suspended or cancelled federal projects can be used on other active projects.
Bid on New Work
Bid on oil and gas and AI projects in the federal sector and diversify by looking for state, local, and private projects if federal contracting is the company’s primary source of income.
Consult Legal Counsel
Before taking any action in response to a Suspension of Work or Stop-Work Order or termination, including layoffs or signing any waivers or agreements, contractors should consult legal counsel to mitigate legal risks and ensure compliance with legal requirements.
Stay Informed
Contractors should stay informed and monitor the Trump administration’s continuing actions and pending court cases which may bring additional changes or inform contractors on winning arguments for cost recovery.
Taxation
Background
Contractors could realize benefits from Trump administration tax policies but may also face challenges. In President Trump’s first term, Congress passed the Tax Cuts & Jobs Act (TCJA). Among other things, the TCJA did the following:
a. reduced the corporate tax rate from 35% to 21%;
b. permitted companies to deduct the cost of certain capital expenditures immediately rather than overtime; and
c. introduced a 30% limit on interest deductibility.
President Trump has encouraged Congress to extend and expand these tax cuts (potentially reducing the corporate tax rate further to 20%). The Trump administration has also encouraged Congress to expand or restructure the qualified business income deduction, allow businesses to continue deducting the full cost of some capital expenditures in the year they are purchased, and reinstate a 100% bonus depreciation deduction for new and used assets.
Labor and employment tax changes may also be coming. Contractors currently benefit from federal tax credits when hiring veterans and disadvantaged workers under the Work Opportunity Tax Credit (WOTC). Those credits are set to expire at the end of 2025, however, and it is hoped that President Trump will push to renew and even expand those credits. President Trump has also advocated changes in the classification of independent contractors and their tax treatment. The President also proposed overtime income exemptions from federal taxation during his campaign, which would conceivably encourage employees to work more overtime, but as of the writing of this article, he has not pursued that proposal in office.
Anticipated Impacts
In the event that Congress lowers the corporate tax rate and expands or restructures business income and deductions, contractors will presumably benefit by paying less in taxes. Likewise, contractors may be able to deduct certain capital expenditures, such as equipment, machinery, and vehicles, in the year they are purchased rather than over several years, which would allow a larger one-time write-off to free up cash in the short term. If the Trump administration renews or expands WOTC tax credits, contractors would be eligible for those credits if they hire veterans and disadvantaged workers. Of course, any gains realized may be offset by business losses resulting from Trump administration policies on tariffs, immigration, and the funding freeze as outlined above. Finally, should President Trump propose and Congress approve changed tax treatment for independent contractors and/or overtime income tax exemptions, contractors will need to make payroll adjustments to account for those changes.
What to Do Next | Existing Projects
Contractors should consult with their tax accountants to discuss any new tax bill approved by Congress. Contractors should also evaluate the benefits of hiring a workforce of employees versus independent contractors or even consider a mixture of workers for different projects, depending on changes to the legal classification and/or tax treatment of independent contractors. If a new tax bill is not imminent, it may benefit contractors to take advantage of current laws before they expire.
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References
[1] For a list of the Trump Administration Executive Orders on tariffs visit: https://ballotpedia.org/Donald_Trump%27s_executive_orders_and_actions_on_trade_and_tariffs,_2025#Executive_orders_issued_by_Donald_Trump_related_to_trade_and_tariffs
[2] For a list of the Trump’s Administration’s executive orders and actions on immigration, visit: https://www.congress.gov/crs-product/LSB11265
[3] https://www.whitehouse.gov/presidential-actions/2025/01/regulatory-freeze-pending-review/
[4] https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-american-energy/; https://www.whitehouse.gov/presidential-actions/2025/03/additional-recissions-of-harmful-executive-orders-and-actions/; https://www.whitehouse.gov/presidential-actions/2025/03/additional-recissions-of-harmful-executive-orders-and-actions/
[5] https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-american-energy/
[6] https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-american-energy/; https://www.whitehouse.gov/presidential-actions/2025/01/removing-barriers-to-american-leadership-in-artificial-intelligence/