The flurry of potential tariffs on imports into the United States announced by the Trump Administration could have an effect on the cost of products that AV and security integrators, electricians, and HVAC contractors purchase and install. Indeed, the potential new tariffs on steel and aluminum will even potentially increase the cost of nails, screws, bolts, brackets and wire, not to mention the components themselves.
According to one legal expert, these newly announced tariffs can be implemented faster than ones that were put in place on China back in 2018 because President Trump is using his “emergency powers” authority, which does not require a Section 301 investigation prior to implementation.
So, what should you do? Here are nine potential actions to take.
- Poll your vendors to find out what price increases you can expect to see. Don’t rely on verbal conversations from your reps or distributors, but get a written response from your manufacturers.
- Look for alternative products if possible that are not subject to the tariffs.
- Go back to manufacturers and distributors to try to find middle ground on the price hikes.
- Have early conversations with your clients about possible price increases, but be wary based on their political affiliation. Use generic terms such as “duty taxes” versus labeling them as “Trump tariffs”.
- Add an addendum to your current proposals opening up the possibility of a price hike. For example: “Due to regulatory changes and possible upcoming economic variations in duty taxes, the cost of bulk wire and other parts may increase up to ??% starting April 3, 2025. All existing proposals which are not assigned a live PO will be subject to revision and potential increase.”
- Re-examine your labor rates and utilization to ensure the company is charging enough for labor and working as efficiently as possible.
- Consider setting a timeline for customers to accept and sign your contracts, so you (and they) can lock in the equipment prices.
- Analyze your current accepted long-term bids to know what your potential liability is. If you have a bid out to a builder for a large multifamily project that is not due to start until later this year, you need to know if the tariffs are going to make that project no longer viable if you cannot alter the bid.
- If you are in need for new vans or trucks for your crews, consider purchasing a new vehicle now. The automotive industry is due to be hit particularly hard by the tariffs on steel, aluminum and microchips.
How Could Tariffs Affect Your Profit on a $10K Project?
Let’s do some simple math for a small audio project that includes a fully-installed price of $10,000 for in-ceiling speakers and cable sourced from outside the U.S., and hit by a 25% tariff:
The D-Tools 2024 Year-in-Review Report shows the average breakdown of an installation contract is 76% product and 24% labor. That equates to $7,600 in equipment on this $10,000 example project. Also, the D-Tools 2024 Margin Report reveals integrators earn an average 43% markup on their equipment, that puts the dealer cost at $4,332 for the products in this example project, leaving $3,268 in equipment profit.
But, if the manufacturer raises the price of the speakers and wire by 25% to cover the import tariff and the integrator has locked themselves into a pre-tariff price with their customer and did not purchase the equipment prior to the price increase, that could decrease the equipment profit by $1,083 for this audio project.
