The year 2025 is bringing a whole new level of uncertainty for residential contractors. With talk of new tariffs on construction materials swirling around, many contractors are feeling a mix of anxiety and cautious hope. If you’re in the business of building or remodeling homes, you’re probably wondering, “What do these tariffs mean for my projects and my bottom line?”
In this conversational guide, we’ll break down what’s going on with the 2025 tariffs, how they might affect materials and labor, and what you can do to stay profitable. We will also review the insights gained from recent economic disruptions, such as the COVID-19 pandemic, and delve into how tools such as Bolster can assist you in navigating these turbulent times. Ultimately, contractors can maintain a competitive edge by adopting smart strategies and utilizing technology.
By now, you’ve likely heard the buzz about tariffs coming in 2025, import duties that could hit everything from steel and aluminum to lumber and appliances. The details have been changing almost weekly, which only adds to the uncertainty. One week there’s talk of a 25% tariff on goods from Canada and Mexico, then there’s a pause, then even a brief scare of a 50% tariff on Canadian metals, then back to 25% again. Any contractor's mind would be left reeling. The whiplash of policy changes has left contractors unsure how to plan for material purchases and bid on jobs.
And even before any tariff officially took effect, the industry’s anxiety was already driving real impacts. In fact, in January, construction input prices jumped 1.4% in a single month, the largest rise in two years. Why? Many builders and suppliers rushed to stockpile materials “before potential tariffs could go into effect,” according to Anirban Basu, chief economist of Associated Builders and Contractors. As Ken Simonson of AGC put it, “The mere threat of new tariffs appears to have led to a significant jump in the cost of many construction materials.” The unexpected rise in material costs is putting pressure on contractors working on fixed-price projects. In summary, the supply chain is experiencing significant disruptions due to rumors of tariffs. No wonder contractors are nervous.
So, if you’re feeling a bit uneasy about the tariff rollercoaster, you’re not alone. One homebuilder CEO captured it well: “The uncertainty of how long these tariffs will continue has been the most challenging aspect of our planning.” It’s hard to make confident business decisions when the rules keep changing. The good news is that by staying informed and being ready to adapt, you can mitigate a lot of that uncertainty.
Let’s talk about the most immediate way tariffs hit contractors: material pricing. When tariffs add, say, 25% to the cost of imported steel, aluminum, or lumber, it eventually shows up in your materials bill. Estimates suggest roughly one-third of construction materials in the U.S. are imported, so these new tariffs can affect a big chunk of the products you rely on. Industry analysts have estimated that President Donald Trump’s proposed 25% tariffs on key materials could increase overall building costs by as much as 10% for certain projects. Steel-intensive work (think high-rise frames or big beams) would be hit hardest, but even homebuilders will feel it in everything from rebar and wiring to siding and nails.
A construction worker installing heavy steel rebar, materials like these are seeing price surges with new tariffs, and contractors worry about the impact on project costs.
For residential contractors, lumber and other homebuilding staples are a huge concern. Tariffs on Canadian lumber have long been an issue (the U.S.-Canada softwood lumber dispute dates back decades), and now additional tariffs are “raising the cost of building materials used in new residential construction and remodeling projects.” The National Association of Home Builders estimated that the latest tariffs could add $7,500 to $10,000 to the cost of building a typical single-family home. That's a significant increase! If you’re a contractor building a $300,000 home, you might have to either charge the client more or eat into your own profit margin by that amount. Neither option is attractive, especially when the housing market is already facing affordability issues.
Many contractors are trying to get ahead of these increases. Some larger builders started stockpiling materials in late 2024 when tariff announcements loomed. One company saved about $52,000 by buying 62% more Canadian lumber than usual before the tariffs hit. Stocking up can buffer short-term projects, but it’s not a long-term solution for most of us—you can’t warehouse a year’s worth of materials easily (or cheaply). Plus, if policies shift again, you could be left holding expensive inventory. It’s a tough call.
Rising material costs directly threaten project profitability. If you bid a job last fall assuming stable prices, you might be in for a rude awakening when you go to purchase materials in spring 2025. Contractors who locked in fixed-price contracts are now getting squeezed, as Simonson noted. Your profit margin can vanish quickly if lumber or drywall costs jump 20-30% unexpectedly. And if you try to pass those increases to clients mid-project, that can lead to difficult conversations or worse.
Materials aren’t the only thing getting more expensive; labor costs in construction are climbing too. Even before tariffs were on the radar, contractors have been dealing with an ongoing skilled labor shortage. Coming into 2025, industry groups projected that the U.S. construction sector needs to attract roughly 439,000 new workers this year to meet demand. Yes, nearly half a million additional hands are needed! This gap has been driving wages up as contractors compete for the limited pool of experienced tradespeople. In fact, average hourly earnings in construction jumped about 4.4% over the past year, outpacing the wage growth in many other industries.
What does this mean on the ground? On the one hand, this could lead to a higher wage bill for your projects; on the other hand, it could potentially result in a shortage of workers to staff them. Many contractors are already operating shorthanded; you might have felt the pain of jobs taking longer because you just can’t find that second electrician crew or an extra drywall team. If tariffs and a rebounding economy (should interest rates ease) lead to more construction projects, the labor crunch could intensify.
As ABC’s economist Basu warned, if we fail to bring in new workers, “labor cost escalation will accelerate, exacerbating already high construction costs.” In plain terms, you might have to pay your people more to keep them from jumping to another firm, and you might have to plan for productivity hiccups due to being short-staffed.
Contractors are facing a tight labor market. A crew on a job site like this is worth its weight in gold, but shortages mean higher wages and tough competition to hire and retain skilled workers.
The labor shortage also has an indirect effect: it limits how quickly the industry can respond to the materials situation. For instance, one strategy to cope with high material prices is to use alternative methods or prefabricated components that require less on-site labor. But to do that at scale, you need a skilled workforce in factories or the ability to retrain crews. With labor already tight, scaling up new approaches is challenging. Contractors might also be hesitant to take on additional projects or large workloads if they’re not confident they can staff them. It requires careful balancing to avoid over-committing to clients when you are aware of the shortage of trade labor.
In 2025, contractors will undoubtedly face challenges due to shortages of both materials and labor. So how can you respond to protect your business and your clients? The key is being proactive with pricing and planning. Here are some strategies savvy contractors are using to navigate this landscape:
This isn’t the first time contractors have faced a sudden economic curveball. The COVID-19 pandemic in 2020-2021 taught the construction industry a lot about dealing with supply chain chaos and price volatility. It’s worth reflecting on those lessons as we face the tariff uncertainty in 2025.
Think back a few years: in mid-2020, lumber prices went through the roof. By May 2021, lumber hit an all-time high, nearly $1,700 per thousand board feet, about four times the normal price. The spike was so extreme that it added almost $36,000 to the cost of a new single-family home at one point. Many contractors were caught off guard; projects were delayed or re-budgeted, and some builders had to put construction on hold waiting for prices to come down. It was a tough time, but those who survived became more agile businesses as a result.
So, what did we learn from the pandemic pricing rollercoaster?
In essence, 2020-2021 forced contractors to become problem solvers and planners at a new level. Those same skills will serve you well with the tariff situation. As the saying goes, “hope for the best, plan for the worst.” If tariffs turn out to be short-lived or less impactful, great, you come out with a healthy profit. If they stick around and drive up costs, you’ll be one of the contractors who had a plan from day one.
One of the best ways to stay ahead of these challenges is by embracing technology. Modern contractors aren’t just hammer-and-nails guys; they’re also data crunchers and project managers armed with software. This is where Bolster comes into play. Bolster is an all-in-one construction management platform that’s designed to help contractors estimate, manage, and track projects with finesse, exactly what’s needed in a volatile environment.
Imagine being able to recalculate your project’s budget on the fly as material prices change. With Bolster’s powerful estimating tools, you can do just that. It has an “AutoCost” database of over 100 million real construction cost items built in.
So if lumber prices go up this month, you can update your estimates and proposals in minutes and know you’re still using current numbers. No more hunting through supplier emails or guessing; the software keeps you informed. Fast, accurate estimating means you can adjust your pricing strategy quickly and confidently. For example, if tariffs bump up the cost of fixtures or windows, you’ll spot it immediately in Bolster and can decide whether to pass that cost on or suggest alternatives to the client.
Beyond estimating, project management tools in Bolster help you keep everything on track amid the chaos. When lead times for materials are shifting, a good project schedule (with critical paths and float built-in) is a lifesaver. Bolster lets you manage your schedule, assign tasks, and even handle client selections and change orders in one place. That means if a material delay happens, you can instantly see how it impacts the timeline and inform the client, then shuffle tasks around to minimize downtime. In a labor-shortage scenario, this scheduling oversight is gold—you can avoid overbooking your crews and use your workforce efficiently. Bolster’s platform also facilitates communication with subcontractors and clients, so everyone stays on the same page if plans change.
Financial tools are another big piece. High material costs and labor rates can strain cash flow for contractors. Bolster helps by tracking your project costs vs. budget in real time, and even handling progress payments from clients. When you have a clear handle on your expenses, you can forecast if/when you might need additional financing or a change order. Some contractors are also using Bolster to present different options to clients, for instance, creating multiple versions of an estimate (a “good, better, best” approach) with various material selections. This way, the client can choose a slightly cheaper option if costs are too high, or splurge on an upgrade if they feel comfortable. It’s a professional presentation that homeowners appreciate, and it can help you upsell or value-engineer smoothly.
In short, leveraging a tool like Bolster is about working smarter, not harder. When external pressures like tariffs and labor shortages hit, the contractors who have solid systems in place can react faster and with less stress. Instead of scrambling with spreadsheets and phone calls, you’ll have the data at your fingertips to make informed decisions. It’s like having an ace up your sleeve; you’re not just building with wood and concrete; you’re building with information and foresight.
We’ve covered a lot of ground and it might sound a bit daunting. Yes, 2025’s tariffs and the tight labor market present real challenges for residential contractors. But here’s the silver lining: contractors are a resilient bunch, and with the right mindset and tools, you can not only survive these challenges but actually thrive. There’s still plenty of opportunity out there. In fact, despite their concerns, a strong majority of contractors expect their project sales to increase in the next six months. People still want new homes, additions, and renovations. Demand is out there, and it could even grow if interest rates dip or infrastructure projects boost the economy.
The key to success will be staying proactive and flexible. By implementing smart pricing strategies, you protect your margins. By adapting to labor shortages—whether through offering training programs to attract new talent, partnering with other contractors to share crews, or investing in labor-saving construction methods—you can get the job done even with a smaller team. And by embracing technology like Bolster for estimating, project management, and financial tracking, you give yourself a competitive edge in efficiency and professionalism.
Embracing technology can be a game-changer. Modern construction software helps contractors adjust estimates quickly, manage projects efficiently, and keep a close eye on finances—crucial for staying profitable when costs and schedules are in flux.
Finally, don’t underestimate the power of planning ahead. It’s easy to be reactive to panic when prices jump or scramble when a crew member quits. But the contractors who will lead the pack in 2025 are those who plan for various scenarios. What if material X doubles in price? What if my lead carpenter falls ill or quits? Having a plan B (and C) means you’re never paralyzed by a situation. It’s this kind of agility that turns potential setbacks into mere speed bumps.
In conclusion, while the tariff situation adds uncertainty, it’s not insurmountable. By learning from the past, responding strategically in the present, and leveraging innovative tools for the future, residential contractors can continue to prosper. Change is nothing new in construction; every job we do is essentially solving a series of problems. Think of tariffs and labor shortages as just another set of problems to solve. With a positive outlook, a willingness to adapt, and support from platforms like Bolster, you’ll keep building strong, profitable projects in 2025 and beyond.
Practical Takeaways for Contractors:
By following these practices, you’ll make your contracting business more resilient. Uncertain tariffs and economic shifts will come and go, but a smart contractor with solid systems and a proactive approach will always find a way to build success. Here’s to thriving through 2025’s challenges and beyond; you’ve got this!