Supply Chain Disruptions: Key Policy Implications and Strategies

Global Tariff Shifts and Supply Chain Volatility

The U.S. administration’s trade policy, headlined by a series of expansive tariffs, has created significant operational uncertainty for global construction and manufacturing. Following a February 2026 Supreme Court ruling that curtailed the use of emergency powers for broad revenue-raising measures, the administration shifted to alternative statutory authorities, including a 10% global tariff under Section 22 of the Trade Act 1974. These changes, coupled with ongoing shipping disruptions in the Strait of Hormuz, are forcing contractors and insurers to fundamentally reassess risk management and contract structures.

Supreme Court Ruling and the Evolution of U.S. Tariffs

The regulatory landscape shifted significantly on 20 February 2026, when the Supreme Court ruled 6-3 that the emergency powers law did not authorize broad revenue-raising tariffs. This decision effectively rendered the “IEEPA Tariffs”—which included a 10% baseline on UK goods and 54% on Chinese imports—unenforceable as of 25 February 2026.

Despite this, the administration moved quickly to implement new measures. By utilizing Section 22 of the Trade Act 1974, the government maintained a 10% global tariff. While these specific global tariffs are slated to expire on 24 July, the market remains wary of how the administration may attempt to recover lost revenue, leading to sustained pressure on international trade logistics.

Strait of Hormuz Disruptions and Construction Costs

Military activity between the U.S. and Iran has caused intermittent but severe disruptions to shipping in the Strait of Hormuz. These incidents have forced cargo vessels to divert from established routes, significantly increasing journey times and logistical costs.

The resulting rise in oil prices has created a ripple effect across the global construction sector. Projects are facing longer lead times for critical materials and components. Contractors are increasingly moving away from fixed-price agreements, opting instead for price adjustment mechanisms that share the burden of material volatility between clients and suppliers.

Insurance Coverage and Inflationary Risk

Insurers are currently evaluating how tariff-driven inflation and shipping delays interact with existing policy wording. While some impacts are quantifiable—such as the 13.1% annual increase in steel prices—others are more opaque, such as localized price hikes for specific spare parts like turbine components.

Under standard indemnity principles, these costs generally form part of the “cost of repair.” However, insurers are now scrutinizing policies for specific exclusions, including “changes in law” or “trade restriction” clauses. There is a growing industry expectation that insurers will seek to ringfence volatile cost categories or apply strict caps on inflationary increases in future contract renewals.

Pro Tips for Contractors

• Review Force Majeure: Examine standard form contracts for clauses that allow for delays caused by circumstances beyond your control, such as geopolitical shipping disruptions.
• Implement Indexation: Use price indexation for labor and materials to mitigate the risk of sudden market fluctuations.
• Audit Portfolios: Assess current supply chains to identify dependencies on regions heavily impacted by trade restrictions.

Frequently Asked Questions

Why were the original IEEPA tariffs ruled unenforceable?

The Supreme Court ruled 6-3 that the emergency powers law did not authorize the president to use such measures for broad revenue-raising purposes.

How are contractors handling material price volatility?

Many are shifting toward contract models that include price adjustment mechanisms to share the financial burden of inflation with clients.

Will insurance cover tariff-related cost increases?

It depends on the specific policy. Insurers are currently checking if such increases are limited by “trade restriction” provisions or specific sub-limits.

Are you managing a project affected by these trade shifts? Share your experience in the comments below or subscribe to our newsletter for ongoing updates on construction law and international trade policy.