While on the campaign trail, President-elect Trump spoke of implementing tariffs. How will government contractors be affected if the upcoming Trump administration enacts its proposed tariffs in 2025? Contractors offering goods to the government should (1) be alert to the possibility that proposed tariffs could increase their cost of performance, (2) factor increased cost and performance risks into their bids and proposals, and (3) ensure appropriate communications with subcontractors to lock-in particular quotes and scheduling to the extent necessary.
Most commercial manufacturers and suppliers of goods are able to pass increased material costs along to the consumer; however, government contractors, especially those with firm fixed-price contracts and options in place, cannot. To protect themselves, contractors should first consider whether the tariffs could affect their contracts under which they are currently performing. If so, they should evaluate the terms of their contracts to determine whether they contain clauses that will allow them to recover. If the tariffs lead to shortages, contractors may also need to seek appropriate schedule relief.