How Steel and Aluminum Tariffs Are Reshaping Your Material Costs

Read This First

Aluminum mill shape prices rose 33.0 percent in a single year. Steel mill products rose 20.7 percent over the same stretch, both measured from January 2025 through early 2026.^[1] If you run a profitable shop, you already felt this. The question that separates the operators who hold their margins from the ones who quietly give them back is not whether prices went up. It is who ends up paying for the increase once the job is signed.

How Much of Your Job Is Actually Exposed

Steel and aluminum together account for 15 to 30 percent of a typical U.S. building's direct material budget.^[8] On the commercial side, the steel frame alone runs about 8 to 9 percent of a building's total cost, and materials inside that frame make up roughly a third of the frame cost, according to steel executive Barry Zekelman.^[4] That is not a rounding error you can absorb quietly across a full schedule of work.

The driver is policy, not a market cycle you can wait out. As of the April 2, 2026 adjustment to the Section 232 tariffs, duties run as high as 50 percent on goods made almost entirely of steel, aluminum, or copper, with derivative goods that are 'substantially made' of these metals carrying a 25 percent levy.^[4] That built on earlier increases: steel and aluminum tariffs went to 25 percent in March 2025, then to 50 percent on June 4, 2025.^[2] The overall producer price index for nonresidential construction materials and services rose 2.9 percent from January 2025 to early 2026, so the metals are pulling the whole basket up.^[1]

The Delay Nobody Prices Into the Bid

The cost line is the part everyone sees. The schedule risk is the part that eats profitable shops alive. Midwest fabricators reported lead times of 16 to 18 weeks for wide flange beams by early 2025, compared with 10 weeks in early February of that year.^[8] A job that stalls waiting on steel is a job carrying overhead with no production against it.

And the jobs themselves are moving. Forty-three percent of contractors reported that at least one project in a six-month window had been canceled, postponed, or scaled back because of higher costs.^[2] By April, nearly 22 percent of ABC contractors had a project delayed or canceled specifically due to tariffs, up from 18 percent in March.^[3] Eighty-seven percent of ABC members had been notified of tariff-related price increases from their suppliers.^[3] When your suppliers are all raising at once, holding a fixed number for 90 days is a bet, not a bid.

Who Eats the Cost Is a Contract Question

Here is where most owners leave money on the table. In fixed-price or lump-sum contracts, the general contractor, subs, and suppliers typically bear the brunt of material price increases.^[5] Worse, the standard AIA A102 and A201 documents do not clearly allocate material escalation risk to any party and do not treat tariffs as a force majeure event.^[7] If you signed a lump sum on an AIA form, the silence in that contract is not neutral. It defaults the risk to you.

A material escalation clause is the tool that shifts that risk back toward the project owner when costs rise significantly during the job.^[5] Cost-plus contracts also handle tariff risk more easily than guaranteed maximum price contracts, because the tariff cost is baked into the cost of the work rather than capped.^[7]

What to Change

Stop signing lump-sum work on unmodified AIA forms without an escalation clause. You have two mechanical options. A cost-based clause compares your actual incurred material costs against your bid-day estimate. An index-based clause ties adjustments to a published benchmark such as the BLS Producer Price Index.^[5] Index-based is cleaner to administer because the number is public and neither party sets it.

Write the clause so it actually functions: name the specific events that trigger escalation, spell out a transparent calculation method, and require notification and documentation.^[9] Expect a cap on how much an owner will absorb, since many clauses include one.^[5] Know your ceiling going in. Federal contracts cap this kind of adjustment at 10 percent. Private construction caps vary more widely, often landing lower, but that federal figure is a useful reference point when you're negotiating your own ceiling.^[6]

Bottom Line

The metal price increases are set by policy you cannot control, but the clause that decides who pays for them is one you write. On your next fixed-price job, the escalation language is worth more attention than the material line itself.

Sources

1. Associated General Contractors of America: PPI data on aluminum, steel, and copper cost increases through early 2026 and the 50 percent metals tariff
2. Associated General Contractors of America: August material cost acceleration, tariff timeline, and project cancellation survey data
3. Contracting Business: ABC April survey on backlog, tariff-related delays, and supplier price notifications
4. Construction Dive: April 2, 2026 Section 232 tariff adjustments and steel frame share of building cost
5. National Law Review: Cost-based versus index-based material escalation clauses and risk allocation
6. Maynard Nexsen: Types of price escalation clauses and the FAR 10 percent default cap
7. The Construction Seyt: AIA contract documents and tariff risk allocation under GMP versus cost-plus
8. Surety Bond Professionals: Steel and aluminum share of material budgets, tariff timeline, and fabricator lead times
9. BrownWinick: Elements of an effective price escalation clause