For developers and facility owners, cost control in industrial construction has always been a high-stakes venture. But today, one factor is complicating financial planning like never before: tariffs. From imported steel to electrical components and specialized machinery, tariffs are significantly impacting the cost structure of new development and the risk profile of long-term investments.
Whether you’re building a new distribution center or expanding manufacturing operations, understanding and planning for the financial ripple effects of tariffs is essential to delivering a project that meets performance, schedule, and budget expectations.
Tariffs: The Hidden Variable in Industrial Budgets
Recent years have seen an increase in trade restrictions and import tariffs, particularly on construction-critical materials like:
- Steel and aluminum
- Electrical panels and components
- HVAC systems and mechanical equipment
- Construction machinery and tools
- Lumber
These added costs often hit after initial budgeting and bidding phases, causing budget overruns and schedule delays. Worse, tariffs are frequently volatile, subject to policy changes, trade negotiations, and global market shifts, which makes forecasting especially challenging.
“For example, we have a current project where we’re still working on securing electrical switch gear manufactured in Canada. Although we purchased it a year and a half ago, and anticipated long lead time, the financial impact of the recent tariffs is something that has created a new challenge. We keep in weekly communication with the switch gear manufacturer and distributor to stress the urgency of our order and to keep lines of communication open around delivery dates. Additionally, we share updates with our client for full transparency” says Jon Sheahan, Hunzinger Project Executive.
LESSON LEARNED:
Moving forward, we are identifying potential tariff costs for our clients and then establishing a specific contingency line item for tariff impacts within our budgets. We do this on every project. We target and review all costs and identify the potential impacts looking strategically at the whole, or part, of the materials and equipment necessary to build the project. We create a list of potential alternative materials, or sourcing of the required materials, that could lessen the impact of the tariffs to develop a more accurate projection of the overall project costs. Striving to provide the latest, most accurate information possible to identify new costs, while not overinflating the budget can be the difference between a project moving forward, being cancelled, or delayed. We ask, can the project absorb the additional costs, or does it need to be value engineered to bring the projections back in line with the original budget? We then present clear recommendations to the owner and design team to move forward in the most prudent way possible, working to keep projects viable. We believe that having these honest, informed conversations up front will benefit all project stakeholders.
For industrial developers and owners, the impact is real:
- Unexpected material price increases mid-project.
- Delays in equipment procurement due to sourcing changes.
- Increased pressure on return-on-investment timelines.
Smart Cost Control Tactics in a Tariff-Driven Market
To stay ahead, forward-thinking owners are adopting new strategies that account for global trade pressures while maintaining project momentum and financial clarity.
- Early Engagement and Market Intelligence
Work with your contractor and procurement teams early to assess the exposure your project may have to tariff-affected goods. This allows you to adjust the sourcing strategy, evaluate alternative materials, or accelerate purchasing to avoid price hikes.
- Diversify Your Supply Chain
If your project relies heavily on materials from tariff-affected regions, investigate domestic or alternative international suppliers. While switching vendors may introduce lead-time or logistical challenges, the long-term cost savings and risk reduction may outweigh them. - Lock in Key Materials Early
Pre-purchasing and warehousing long-lead items that are subject to tariffs can protect your project from future cost increases. While this approach may raise short-term carrying costs, it often leads to significant long-term savings, enhanced deliverables, and a more predictable project schedule.
- Early Stage Cost Estimating Process
Engage construction partners and cost estimators early in the conceptual phase. Building a budget based on real-time market data, rather than outdated cost models, provides a more accurate financial baseline and can help secure financing faster.
- Budget for Strategic Contingencies
Add a tariff-specific line item to your contingency fund. This allows you to plan proactively for future developments without resorting to emergency value engineering that compromises the quality or utility of your facility.
- Choose Partners Who Share Your Vision
Your general contractor should be more than a builder—they should be a strategic advisor. Look for partners who embrace collaboration, communicate openly about risks, and bring creative solutions to the table when the unexpected occurs.
The Bottom Line
Tariffs and inflation may not be as visible as rising labor rates or material shortages, but their impact on industrial project budgets is just as significant, if not more unpredictable. For developers and facility owners, success in today’s market means planning not just for what you can see, but for what might change overnight.
By adopting a proactive, agile approach to cost management and aligning with partners who understand the global market, you’ll be better equipped to safeguard your project’s budget, schedule, and profitability from the turbulence of trade policy.
Southeastern Wisconsin’s industrial market is powered by a wide range of manufacturers and industrial operators, and Hunzinger has been a trusted partner every step of the way for many. From facility operations and infrastructure upgrades to specialty contracting and process improvements, our experienced project management, estimating, and field teams deliver smart, efficient solutions that keep our clients competitive, delivering projects on time and within budget. Whether you’re planning new construction or retrofitting an active facility, Hunzinger is ready to help.
Want to learn more or connect with our team? Reach out to Ryan O’Toole at rotoole@hunzinger.com.
