New copper tariffs effective August 1st are creating an impossible squeeze for electrical subcontractors caught between fixed-price contracts and skyrocketing material costs, according to a leading construction attorney.
“Electrical subs who are in the middle of projects are probably going to see an immediate impact,” says Lisa Colon, Partner at Saul Ewing. The 50% tariff on copper products, essential for electrical wiring, threatens to upend project budgets and timelines across the construction industry.
The structure of electrical contracting makes these businesses particularly vulnerable to sudden material cost increases, Colon explains. Unlike structural elements or windows that are typically ordered well in advance, electrical supplies are usually purchased just weeks before installation begins.
“Most of these subcontractors are on a lump sum proposal, not much wiggle room, and profits already tight. So how much profit can they eat?” Colon asks, noting that many contracts signed months ago didn’t anticipate such dramatic price increases.
Beyond direct cost impacts, Colon warns the tariffs are likely to trigger supply chain disruptions as businesses attempt to hedge against future increases.
“Every time there’s a tariff affecting prices, you’re going to immediately see not only pricing be affected, but also supply chain, because folks then start to hoard,” she explains.
This hoarding behavior can create artificial shortages and further price volatility, compounding challenges for contractors trying to maintain project schedules.
The situation is likely to generate significant legal challenges as contractors seek relief through change orders and contract provisions, according to Colon.
“The problem will become the pricing, this amount of squeeze that the electrical sub can take,” she says. “If they have to ask for a change order on the pricing, does their contract allow for that?”
These disputes could cascade up the construction chain, as general contractors attempt to pass increased costs to project owners through contingency clauses.
The stop-start nature of recent trade policies has made it difficult for contractors to implement effective risk management strategies, Colon notes.
“The problem has been that the tariffs have been off and on, so folks don’t really know what’s real and what to do,” she explains. “If you order long lead items, or you’re trying to stock up on items, you have to consider: do you have the space? Is there a way to store this?”
Storage itself creates additional costs through warehouse fees and insurance requirements – expenses that further strain already tight profit margins.
Colon advises her clients to focus on strengthening contract language around material cost increases and escalation clauses. However, she acknowledges there’s no perfect solution in the current environment.
“Nothing’s foolproof, but make sure that we have some sort of protection,” she says, emphasizing the importance of careful contract review and clear communication between all parties about potential cost impacts.
