Tariff changes are reshaping costs for integrators and contractors, making it essential to stay proactive.
The flurry of new tariffs on imports into the United States is poised to impact the cost of products that AV and security integrators, electricians, and HVAC contractors rely on. The latest tariff changes on steel and aluminum—currently set at 25% across all imports—will likely drive up prices on essential components like nails, screws, bolts, brackets, and wire, along with the materials themselves.
Additionally, universal tariffs of 10% on imports from all countries have gone into effect, with China, Hong Kong, and Macau facing a 20% tariff as of this writing. While some exclusions apply, these measures will undoubtedly affect pricing across the industry.
These measures have been enacted swiftly under emergency powers authority, meaning that businesses must adapt quickly to fluctuating costs and potential supply chain disruptions.
Tariff changes are reshaping costs for integrators and contractors, making it essential to stay proactive. With pricing fluctuations impacting everything from raw materials to finished products, businesses need clear strategies to protect margins and adapt to the changing landscape. Here are nine key actions to take:
- Get clear on price increases. Reach out to your vendors for written confirmation of upcoming price changes. Don’t rely on conversations … secure documentation from manufacturers to plan accordingly.
- Identify tariff-free alternatives: Explore substitute products that aren’t as affected by tariffs to mitigate cost increases without sacrificing quality or customer loyalty.
- Negotiate price adjustments: Engage manufacturers and distributors in discussions to see if you can find middle ground on cost hikes. Bulk purchasing or adjusted payment terms might help offset increases.
- Be strategic in client conversations: Keep customers informed about potential price changes. Frame the discussion around “duty taxes” rather than specific policy-driven tariffs.
- Update proposal language: Add a clause to proposals allowing for price adjustments due to regulatory shifts. You could use something like: “Due to potential economic changes in duty taxes, costs for materials, such as bulk wire, may increase by up to XX% starting June 2, 2025. All proposals without a signed purchase order are subject to revision.”
- Refine labor utilization: Reassess labor rates and efficiency to ensure your team is operating at optimal profitability in light of rising costs.
- Lock in equipment pricing: Establish firm timelines for contract acceptance to ensure your business and its customers can secure pricing before further increases take effect.
- Evaluate long-term project risks: Review accepted bids for future projects to determine whether tariffs will significantly impact costs. If necessary, renegotiate or adjust bids before commitments become financially unmanageable.
- Make vehicle purchases now: If fleet upgrades are on your radar, then consider making those investments now. The auto industry faces significant tariff pressure on steel, aluminum, and microchips, making costs likely to rise in the near future.
Will Tariff Changes Shrink Your Profit on a $10,000 Job?
Understanding the financial impact of tariffs is crucial for integrators. Let’s break it down with a real-world example.
Imagine an audio installation project priced at $10,000, including in-ceiling speakers and cable sourced internationally. A 25% import tariff on those materials could significantly affect profit margins.
Industry data from the D-Tools 2024 Year-in-Review Report shows that installation contracts typically allocate 76% to equipment and 24% to labor. In this scenario, that means $7,600 goes toward product costs. Meanwhile, the D-Tools 2024 Margin Report indicates that integrators average a 43% markup on equipment, placing the dealer’s actual cost at $4,332, leaving $3,268 in profit from the equipment alone.
However, if the manufacturer raises prices by 25% to absorb the import tariff—and the integrator hasn’t purchased equipment before the increase—the price hike could cut into profit by $1,083 on this project.
Without proactive planning, tariff-related costs can erode margins quickly. Keeping a close eye on pricing changes, locking in contracts early, and exploring alternative product sources are all ways integrators can mitigate financial risk.
This article was provided by D-Tools, an NSCA Business Accelerator.
