Tariffs and Construction Contracts: Who Eats the Increase

When a tariff raises your material price in the middle of a job, who pays for it is decided by your contract, not by the tariff. There is no general rule that a duty imposed after you signed becomes the owner’s problem. On a stipulated sum contract with no escalation clause and no change-in-law provision, the increase is yours. If the contract has an escalation clause covering that material, you follow the clause. If it has a change-in-law provision, that is a separate and often better hook, because it does not depend on an index threshold being cleared.

So before you call your rep or read the news, open the contract and answer three questions: is there an escalation clause, is there a change-in-law clause, and what is the contract type. Everything else follows from those answers.

Everything below sits on those three answers: what each of those clauses does, where the increase actually reaches you (it is rarely a line labeled “tariff”), what the published cost data shows about the size of the problem, and what to do this week on a job already in progress.

The default answer is the uncomfortable one

A fixed price is a fixed price. On A101-2017, the owner-to-contractor agreement for a stipulated sum, you have agreed to deliver the work for a number. A cost increase on your inputs does not change that number by itself. Changes to the contract sum run through the change order machinery: on AIA jobs, G701 is the standard Change Order form, and G714 the Construction Change Directive used when pricing is not yet agreed, and a change order requires signatures from owner, contractor and architect. Nothing in that machinery triggers itself because a cost went up.

That is worth saying plainly because a lot of advice on this topic implies otherwise. Nothing about a tariff automatically entitles anyone to more money. The entitlement comes from language you either negotiated or did not.

AGC has characterized price escalation and supply chain disruption as the number one issue in construction contracts, and the absence of an escalation clause as a killer clause for general contractors on private vertical work. That framing is exactly right, and it is about what the contract says, not about what the market did.

Change in law is a different clause from escalation

This distinction is worth knowing cold, because on a duty-driven increase the change-in-law route is frequently the cleaner one.

An escalation clause adjusts price when a named material moves against a named index, usually subject to a trigger threshold and often a cap. A change-in-law clause adjusts price when the law changes after contract execution and that change costs you money. ConsensusDocs 200 section 3.21.1 requires equitable adjustment of contract price or time for costs resulting from a change in law after contract execution, a hook distinct from the 200.1 escalation amendment.

Why that matters for tariffs specifically: an escalation clause with a 3% trigger only pays if the index clears 3%. A change-in-law clause does not care about an index at all. It cares whether the law changed after you signed and whether you can trace the cost. So on the same job, with the same increase, the two clauses can produce very different answers.

Three practical cautions.

“After contract execution” is doing real work. If the duty was already in force when you signed, it is not a change in law as to your contract, even if your price only moved later. Date your bid and your execution and know which side of them the measure falls on.

Tracing is harder than it sounds. A change-in-law claim needs the cost to be attributable to the measure. Your distributor’s invoice usually does not say so.

Read your own contract, not a summary. Change-in-law wording varies enormously, and some versions exclude cost impacts entirely and address only time. Nothing in this post substitutes for the paragraph on your job, or for a lawyer on a claim of any size.

What the tariffs are, as published

ConsensusDocs maintains a tariffs and price escalation resource center, and that page lists current tariff rates affecting construction inputs including 50% on steel, aluminum and copper items and 25% on derivative products.

Treat those figures as as-published on that page rather than as a settled fact about your specific SKU. Rates, product scope and exclusion lists on trade measures change, sometimes quickly, and derivative product lists are defined by tariff classification rather than by trade category. Before you put a number in a claim, verify the current rate and confirm that the specific item is in scope. Guessing here is the fastest way to lose credibility with a reviewer.

Where the increase actually reaches you

Almost never as a line on your invoice that says “tariff.” The duty is paid at import by the importer of record, which is somebody upstream of you, and it moves down the chain as ordinary price. So what you see is:

A higher unit price on the same part number, with no notice and no explanation, which looks exactly like material price creep because at the invoice level it is indistinguishable from it.
Shorter quote validity. Distributors facing volatile replacement cost shorten the window a quote is good for, or start writing “subject to change at time of shipment” on the face.
Surcharge lines. Metal surcharge, freight, fuel. Some are legitimate pass-throughs and some drift.
Substitutions. The counter offers an equivalent from a different manufacturer. Your negotiated rate and any special pricing agreement behind it are attached to the original catalog number, which is one of the mechanisms in contract price versus counter price, and a substitution can move your price for reasons that have nothing to do with a duty.
Longer lead times, which cost money in a different currency.

The practical consequence: you cannot claim a tariff increase you cannot separate from ordinary price movement. The separation comes from your own unit price history, per SKU, per branch, over time. If you do not have that, build it before you need it.

What the cost data actually shows

The published producer price data supports the general picture without needing anyone to exaggerate it.

AGC’s May 2026 release reported that the producer price index for inputs to new nonresidential construction rose 1.8% for the month and 8.4% year over year, the largest annual jump since the pandemic, while contractors’ bid prices rose only 3.5% year over year, with aluminum mill shapes up 48.8%, copper and brass mill shapes up 26.8% and fabricated structural steel up 15.6% year over year. That gap between input costs and bid prices, roughly five percentage points in that month, is the squeeze, and it is the number to put in front of an owner rather than any single commodity figure.

The April 2026 release showed the same shape: input PPI up 1.7% for the month and 6.6% year over year against bid prices up 3.6%, with aluminum up 37.3% and copper and brass up 20.9% year over year. And by June 2026 the input index was still 7.1% higher than a year earlier despite a 0.5% decline for the month, which is a useful reminder that these series move in both directions.

Underneath the aggregates, the metals series tell the story on the materials tariffs touch. Copper and brass mill shapes, BLS series WPU102502, read 645.990 in January 2025 and 747.384 in January 2026, about 15.7% over the year, and 803.275 in June 2026 (preliminary). Steel mill products, series WPU1017, went from 315.369 in January 2026 to 361.439 in June 2026 (preliminary), roughly 14.6% in five months, though still below the December 2021 peak of 449.711. Aluminum mill shapes, series WPU102501, read 246.9 in January 2025 and 391.268 in June 2026 (preliminary).

Two honest caveats. These indexes measure the whole market, not the tariff component of it, and no published series isolates the duty. And BLS marks recent months preliminary and revises them, so re-pull any value before it goes in a document.

Which situation are you in

Your contract	Who eats the tariff increase	What to do
Stipulated sum, no escalation, no change-in-law clause	You do	Mitigate, document, and ask commercially rather than contractually
Escalation clause naming that material	Shared per the clause	Run the index math against the trigger and the cap, then submit
Escalation clause naming other materials only	You do, on this material	Check the materials list before you build a claim
Change-in-law clause, measure post-dates execution	Owner, per equitable adjustment	Trace the cost to the measure and give notice in the required form
Cost plus with a GMP	Depends on the GMP and its contingency	Read the contingency language before you spend it
Bid outstanding, not yet awarded	Nobody yet, which is your opening	Get the clause in now, and shorten your bid validity
Subcontract with a flow-down	Follows the prime, usually	Confirm the flow-down actually carries the escalation right down

The two rows worth staring at are the last two. The cheapest tariff protection anyone gets is the clause they negotiate before award, and the second cheapest is a bid validity window short enough that you are not holding a price you cannot buy.

What to do this week on a job in progress

Read the contract and write down the three answers. Escalation clause: yes or no, and what materials. Change-in-law clause: yes or no, and does it cover cost or only time. Contract type and date of execution.
Give notice now if there is any chance of a claim. Notice deadlines run from when you knew or should have known, not from when you finished quantifying. On AIA jobs, A201 section 1.6.2 imposes a heightened notice standard for Claims: written notice by certified or registered mail, or a courier providing proof of delivery. Late notice kills otherwise good claims.
Buy out what you can. Lock quantities and prices on the exposed materials, in writing, with quantities and an expiration on the face. Mitigation is not just good practice, it is frequently a contractual duty: under ConsensusDocs 200.1, both parties carry a duty to mitigate, impacts caused by the contractor or its subs and suppliers are excluded, and the contractor gets no overhead and profit on the equitable adjustment.
Ask your distributor the direct questions. Which of my regular SKUs are affected, what is the current lead time, how long is a quote good for now, and will you hold a price if I commit quantity. Reps answer these all day and the answers are useful even when they are bad news. If that turns into a broader pricing conversation, the ground rules are in how to negotiate with your supply house.
Separate market movement from billing noise. Run the affected material quote to PO to invoice. A three-way match catches the lines that are not market movement at all, and those belong in a credit request to your supplier rather than in a change order to your owner.
Start the price history if you do not have one. Per SKU, per branch, per month. Without it, every future conversation about a price increase is an opinion.
Build the packet as you go. The documentation an escalation change order needs is mostly evidence captured months before the claim, especially the dated bid-day quote.

For the next contract

Get an escalation clause, and get a change-in-law clause. They are different instruments and you want both, and if the owner strikes the escalation language, the objections owners raise have specific answers. ConsensusDocs 200.1 is marketed as the only standard material price escalation clause, listing the specific impacted materials on a project and adjusting against an agreed objective market index in both directions, which makes it a reasonable starting point even on jobs that are not otherwise on ConsensusDocs paper.

Then settle which index the clause names before you argue about the trigger percentage, because the series choice moves the recovery more than the threshold does. And shorten your bid validity. A long bid validity window in a volatile market is an unpriced option you are handing the owner for free.