Remodeling in a Tariff World: Navigating Uncertainty with Strategy

As economic uncertainty rushes through the world markets due to tariffs, tariff pauses, and escalating combative rhetoric, remodelers wonder what the road ahead looks like. Kermit Baker, Chief Economist with The American Institute of Architects (AIA), untangled some of it in a recent Remodeling Thought Leaders call hosted by Mark Richardson and Professional Remodeler. His assessment: while the broader economic picture is uncertain, remodeling may fare better than other sectors—but it will be a bumpy ride.

A narrow window of optimism

“The tariff situation isn’t as grim for remodeling as it is for others,” Baker stated. While manufacturing-heavy industries and sectors heavily reliant on targeted imports are bracing for impact, the remodeling market is somewhat insulated. That’s largely because of the strong domestic base of building products and materials, and a construction sector less dependent on global supply chains than others.

There’s also a silver lining in investor behavior. In response to uncertainty, many investors pull back from the stock market and move capital into bonds. That shift is nudging mortgage rates downward—slightly. “We’ve seen a modest dip, maybe a couple tenths of a point,” says Baker. While not dramatic, this easing could help maintain homeowner appetite for borrowing, and in turn, remodeler backlogs.

The other side of the coin: cost pressure and volatility on the rise

Despite the qualifiers, the challenges are real and growing. At the top of the list is pricing. Building materials are getting more expensive and unpredictable. Tariff changes are introducing volatility not just in pricing but in availability.

“We may be heading for something similar to what we saw during the pandemic,” Baker warns. Remodelers should prepare for extended lead times, unpredictable delivery schedules, and ongoing supply chain disruptions that ripple through project planning.

That unpredictability is impacting client behavior, too. According to Baker, remodelers are already reporting increased hesitancy among homeowners, especially on large-scale projects. “Off-again, on-again attitudes” are becoming more common, and although financing hasn’t yet become harder to obtain, the specter of tightening credit looms in the background.

Business model shifts on the horizon

Baker sees a growing likelihood that remodelers will need to adapt their operational strategies to stay competitive in this new environment. One shift already taking place: front-loading material purchases. Large contractors are locking in pricing and inventory now to hedge against further cost escalation or availability issues later.

“Of course, that puts pressure on cash flow,” Baker notes. Paying for materials months before they’re needed is a financial stretch, especially for small to mid-sized firms. Still, many are choosing certainty over risk.

He also anticipates more warehousing. Firms are buying and storing materials now, even if they won’t be used for 6 to 12 months. While this strategy is already taking hold in commercial construction, residential remodelers may begin to follow suit, particularly if pricing volatility persists.

A fork in the road for U.S. trade policy

Baker closed his analysis explaining why the reasoning behind tariffs is at odds with each other.

“There seem to be two completely different goals driving these moves,” he explains.

• One theory is a long-term, protectionist stance: 'use tariffs to make U.S. manufacturers more competitive by shielding them from cheaper imports.'
• The other is strategic: 'use tariffs as a bargaining chip to negotiate for broader global trade concessions and ultimately reduce tariffs across the board.'

“Those are opposite goals,” Baker notes. “And quite frankly, I don’t think we know how this is going to play out yet.”

Adapting amid ambiguity

For remodelers, the bottom line is clearly fuzzy. While the sector is not bearing the full brunt of tariff policy, it isn’t immune either. Materials cost more. Clients are jittery. The long-term rules of engagement—on trade, pricing, and planning—remain unclear. Fortunately for remodelers, dealing with unexpected changes is in their DNA.