The Supreme Court struck down President Donald Trump’s use of the International Emergency Economic Powers Act to impose sweeping tariffs on Feb. 20, removing the legal basis for much of his administration’s 2025 trade agenda; however, for construction companies, the cost exposure remains largely intact.
Within hours of the ruling, the White House invoked Section 122 of the Trade Act of 1974, which imposed a 10% ad valorem surcharge on most imports starting February 24. The statute authorizes a surcharge of up to 15% and limits it to 150 days unless Congress acts. The measure applies broadly to imports from all countries, except when denied by existing Section 232 national security tariffs or goods that qualify for duty-free treatment under the US-Mexico-Canada Agreement.
Global Trade Alert, a trade policy watchdog group, estimates that the US trade-weighted average tariff rate now stands at 13.2 percent, down from the 15.3 percent level before the decision, but well above the 8.3 percent rate that would have applied without a replacement measure.
For construction, what matters most is what hasn’t changed. Section 122 does not stack with covered primary steel and aluminum that are already subject to section 232 tariffs. These inputs continue to be included in the tariffs. Equipment, manufactured assemblies and other components manufactured outside the 232 categories now face the 10% surcharge. This includes items such as switchgear, transformers and specialized heavy equipment of global origin for infrastructure projects.
S&P Global Ratings said in a Feb. 23 update that tariff levels remain historically high and that its forecasts for GDP, employment and interest rates remain largely unchanged. From a credit perspective, trade friction persists.
Deniz Mustafa, senior director of infrastructure finance at Associated General Contractors of America, said lenders and bond markets largely anticipate a swift political response if the Court overturns the previous regime.
“I don’t think anyone who followed this story thought that this would be it: there would be no more fees and we’re done,” Mustafa said. In the near term, he added, it is too early to see measurable changes in credit spreads or underwriting assumptions. But questions remain about what follows the 150-day window.
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Contracts and Cost Allocation Risk
“The new rates imposed under Section 122 will affect the construction industry in two different ways,” Anirban Basu, chief economist at Associated Builders and Contractors, told ENR. “First, and more directly, this broad 10% tax will put further upward pressure on the prices of certain building materials.”
A Global Trade Alert analysis shows that the US trade-weighted average tariff rate ranges from 8.3% to 15.3% under different policy scenarios. With a 10% Section 122 surcharge, the effective rate is 11.6%, rising to 13.2% if increased to 15%.
Chart courtesy of Global Trade Source
The direct effect is limited by the Section 232 exclusion and USMCA compliance, Basu said, but price volatility remains a factor.
Josh Zive, a partner at Bracewell who focuses on international trade and customs law, said Section 122 presents immediate exposure precisely because it has little litigation history.
“The most immediate threat is the Section 122 fees that have already been put in place,” Zive said. The global surcharge “covers a wide range of materials” and “a large amount of construction equipment will end up being affected by these fees.”
Legal exposure may also be closer to contractors than many realize.
“The importer of record is the party legally responsible for customs compliance and payment of entry duties under federal law,” said Trent Cotney, head of Adams & Reese’s construction practice group and general counsel of the National Roofing Contractors Association. If a contractor coordinates the import, Cotney said, he can assume the legal obligation to pay the fees and ensure accurate entry.
Refunds, when available, flow to the entity that paid the tariff bill, usually importers or logistics companies, not contractors, Mustafa explained. Cost recovery through supply chains can become complex, involving suppliers, manufacturers and pricing agreements. “The whole reimbursement process is going to be a disaster,” he added.
The risk of transmission therefore depends on the language of the contract. Many agreements treat duties and taxes as part of the cost of the contractor’s work unless a change of law or tax adjustment clause expressly includes rate increases. When owners reject this interpretation, contractors may be forced to absorb the cost.
Mustafa said that during previous rate episodes, suppliers shortened quote validity periods, in some cases from months to weeks, forcing contractors to build contingencies into bids. If suppliers hold prices for a week, but owners require offers to be valid for a month or more, “that’s when you build in that contingency,” he said.
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Public Owners and Project Pipeline
For publicly funded projects with fixed endowments, flexibility is often limited.
Mustafa cited previous federal infrastructure programs, such as the Jobs and Infrastructure Investments Act, where inflation alone reduced purchasing power, forcing local agencies to cover cost increases through bonds, taxes or scope reductions.
Citing a study by the Eno Center for Transportation, Mustafa noted how the IIJA returned nearly $60 billion in value due to inflation Federal aid programs may allow escalation mechanisms in some cases, but “usually locals will have to try to find it somewhere else,” he said.
Economic modeling reinforces the pressure. Yale’s Budget Lab finds that even without the IEEPA tariffs, the rest of the tariffs fall more heavily on metals, vehicles and electronics — central inputs to infrastructure construction and energy. Yale projects that while manufacturing output will expand modestly under the current environment, construction output will contract by 2.4% over the long term.
Mustafa expects policy volatility (more than 10% itself) to weigh on decision-making.
“Yes, because there is uncertainty about what will happen in the next 150 days,” he said when asked if the surcharge could affect the project’s start or delay in the next six to 12 months.
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The administration has flagged additional Section 301 actions and is advancing multiple Section 232 investigations that could conclude in the coming months. These authorities allow country or sector specific rates and do not have a time limitation like Section 122.
The Court reduced an executive tool. For construction companies, the responsibility of the importer of record, the risk of contract allocation and the material costs built into the rates remain intact, and may still change according to new research.
Although the mechanism changed, the exposure did not and now the volatility moves with it.
