Increased Tariffs: Get an Escalation Clause Ready

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Ready, Set, Tariff!

A new round of tariffs are hitting imported Chinese home improvement products. Some common items on the list are:

  • Wall and floorboard
  • Light fixtures
  • Cabinets
  • Heating and cooling equipment
  • Stone (Countertops, Tile)
    • Mosaic and glass especially, two of the most trendy types right now

In total, we’re looking at 10 Billion in Chinese goods receiving tariffs. This equates to a 10- 25% tariff, or a n up to 2.5Billion tax increase. This is all on top of the already imposed 1 billion in tariffs over the last few months.

The biggest question here is, What’s next? It’s hard to say as were already looking a few billion in tariffs in just a few months. We could see even more. As a contractor, you need to be prepared to pay additional costs for material in the coming months. When selling jobs for months in advance, be sure that you have escalation clauses built in. You want to cover yourself should another increase occur. You may also be forced to purchase from US-based manufacturers should Chinese tariffs get out of control.

If you’re already buying 100% US made products, which is unlikely, you shouldn’t have much to worry about. In fact, you could even turn this into a marketing opportunity as someone who sells only US made products…lots of people like that.

If you’re a house flipper, this might not be a good sign, either. Flipping involves putting a facelift on many things, most of which involve stone. Chinese imported stone is one of the largest tariffed items. You may have to leave the mosaic and glass out and opt for a cheaper kind. You might also have to leave stone out altogether. Some contractors may opt to go cheaper, avoiding potential unforeseen costs down the road. Ultimately, this may impede on your ability to flip a home, assuming it is less desirable.

This is something we have not experienced in a long time. How will you be coping with the new tariffs and increased costs?

*These added costs will likely compound with the already low supply currently occupied by natural disasters.*

For more information on this topic, check out the full story on CNBC here.

Thanks for reading!

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