How Tariffs Impact Contractors and Their Surety Bonds

August 26, 2025

Image of a cargo ship sailing across the ocean, symbolizing how tariffs may affect contractors and their surety bonding needs.

Tariffs are government-imposed taxes on imported goods, often designed to protect domestic industries or generate revenue. These fees, which may be charged as a percentage of value or a flat rate per unit, are paid by the importer at the point of entry into the U.S. For the construction industry, this means materials like steel, aluminum, lumber, and electrical components can quickly become more expensive, creating price volatility that ripples through projects.

The Effect of Tariffs on Contractors

Rising Material Costs and Tighter Budgets – When tariffs raise the price of key construction materials, contractors face increased project costs. To secure bonding for the same scope of work, surety companies require contractors to demonstrate higher levels of working capital, putting extra pressure on liquidity.

Increased Contractual Risk – Fixed-price contracts are particularly risky in a market driven by tariffs. Contractors locked into these agreements must absorb rising costs themselves, often eroding profit margins or creating the risk of financial loss. This heightens surety concerns about a contractor’s ability to complete the project.

Challenges in Bidding – Unpredictable material costs make it harder for contractors to bid accurately on new projects. Many may increase bid prices to hedge against risk or hesitate to commit without protective clauses, such as price-escalation provisions.

Strategies to Protect Bonding Capacity

Contractors can take proactive steps to safeguard both their bonding capacity and financial stability in the face of tariffs:

Include protective clauses: Add provisions for price escalation, force majeure, or material substitution in contracts to mitigate unforeseen cost increases.
Diversify suppliers: Build relationships with multiple vendors, including domestic manufacturers, to reduce reliance on tariff-sensitive imports.
Lock in pricing early: Secure firm quotes from suppliers before submitting bids to minimize the risk of price spikes later.
Communicate openly: Keep surety partners informed about risk management strategies and contract protections. Likewise, maintain transparency with project owners when tariff-related issues arise.

How Construction Bonding Specialists Can Help You Secure a Bond

Tariffs may be outside of a contractor’s control, but their financial impact doesn’t have to be. With the right planning, stronger supplier networks, and open communication with sureties, contractors can better manage cost fluctuations and protect their bonding capacity.

Need help securing a construction bond? With decades of experience, Construction Bonding Specialists, LLC has worked with contractors of all sizes to deliver tailored bonding solutions. Through partnerships with multiple Treasury-listed and AM Best-rated surety markets, we can assist with nearly every type of bond—including Bid, Performance, Payment, Financial Guarantee, Supply Bonds, and more.

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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a dedicated surety-bond-only agency with decades of bonding experience, we strive to discover surety solutions for all types of cases, ranging from routine to challenging. Contact us online or call us at 248-349-6227 to learn more.

Written by the Digital Marketing Team at Creative Programs & Systems: https://www.cpsmi.com/.