How Policy Shifts Are Reshaping Contractors Perceptions of Risk, Opportunity, and Strategy

As the U.S. home improve­ment and con­struc­tion sec­tors move through anoth­er year of macro­eco­nom­ic and pol­i­cy uncer­tain­ty, new research from the Home Improve­ment Research Insti­tute (HIRI) reveals a sharp diver­gence in how con­trac­tors are nav­i­gat­ing change. In par­tic­u­lar, con­trac­tors with $1M+ in annu­al sales and those with Demo­c­ra­t­ic polit­i­cal lean­ings are far more like­ly to antic­i­pate dis­rup­tion from tar­iffs, immi­gra­tion pol­i­cy changes, and reg­u­la­to­ry shifts in 2025. Mean­while, opti­mism about busi­ness prospects is strongest among larg­er firms and Repub­li­cans; set­ting the stage for a com­pet­i­tive land­scape where agili­ty and adap­ta­tion will deter­mine win­ners and losers. 

These find­ings are com­ing from HIRI’s study on Con­trac­tor Response to Pol­i­cy Shifts, which HIRI mem­bers can access in full. 

Tariffs Take Center Stage, But Impact Is Far from Uniform 

Among all the pol­i­cy fac­tors con­sid­ered (tar­iffs, inter­est rates, immi­gra­tion, sus­tain­abil­i­ty man­dates to name a few), tar­iffs are per­ceived as the most dis­rup­tive exter­nal risk for con­trac­tors in 2025. Over a third (36%) of con­trac­tors expect sig­nif­i­cant impact from tar­iffs, sur­pass­ing con­cerns around inter­est rates (33%) and immi­gra­tion (29%).

Bear in mind that this topline find­ing masks wide vari­a­tion beneath the sur­face. A hand­ful of these vari­a­tions include how: 

• Larg­er firms (with $1M+ annu­al sales) are near­ly twice as like­ly as small­er firms to antic­i­pate sig­nif­i­cant impact from tar­iffs (49% vs. 30%). 

• Democ­rats are much more like­ly than Repub­li­cans to expect dis­rup­tion from tar­iffs (56% vs. 28%), high­light­ing the polit­i­cal polar­iza­tion around trade pol­i­cy impacts. 

• Mechan­i­cal con­trac­tors con­sis­tent­ly report the high­est sen­si­tiv­i­ty to tar­iff-dri­ven dis­rup­tions, par­tic­u­lar­ly around sup­ply chain delays and mate­r­i­al cost inflation.

Note also that homeowner’s behav­iors great­ly influ­ence con­trac­tor sen­ti­ments, which helps put into con­text find­ings from this Con­trac­tor spe­cif­ic report, as well as HIRI’s June 2025 Size of Mar­ket fore­cast into bet­ter context. 

Immigration and Labor Policy: Pressure Intensifies at the Top 

The find­ings from HIRI’s Con­trac­tor Response to Pol­i­cy Shifts study makes clear that those with the high­est rev­enue and Democ­rats are also most like­ly to antic­i­pate neg­a­tive impacts from changes in immi­gra­tion pol­i­cy. Increased labor costs, dri­ven by a shrink­ing pool of skilled work­ers and height­ened wage pres­sure, are the most wide­ly antic­i­pat­ed consequence. 

42% expect increased labor costs, and 39% fore­see few­er skilled work­ers due to immi­gra­tion pol­i­cy changes. Larg­er firms and Democ­rats report the great­est con­cern, under­scor­ing how mar­ket lead­ers often feel the pinch of pol­i­cy change first and most acutely. 

For small­er firms, Land­scap­ers, and rur­al Pros, these head­winds are less pro­nounced, like­ly due to sim­pler oper­a­tional mod­els or more sta­ble local labor markets. 

Financing Costs: The Key Macro Impact for Larger Firms

Beyond labor, financ­ing costs have emerged as a defin­ing pain point, espe­cial­ly for larg­er con­trac­tors. 39% of con­trac­tors over­all cite increased financ­ing costs as a major chal­lenge, with larg­er firms dis­pro­por­tion­ate­ly affected.

Oth­er impacts include tighter cash flow, more fre­quent project delays, and even price cuts to meet home­own­er afford­abil­i­ty thresh­olds. These macro­eco­nom­ic pres­sures are ampli­fy­ing the impact of pol­i­cy shifts, espe­cial­ly for com­pa­nies that rely on sig­nif­i­cant cap­i­tal or oper­ate at scale. It can also be impact­ing the ways that con­trac­tors respond to promotions.

The Proactive Playbook: Upskilling, Innovation, and Efficiency

In response to this swirl of chal­lenges, most con­trac­tors aren’t retreat­ing, they’re dou­bling down on offense. The dom­i­nant theme is proac­tive adap­ta­tion, not retrenchment.

Improv­ing employ­ee skills (32%) and adopt­ing new tech­nolo­gies (29%) top the list of strate­gies for seiz­ing new oppor­tu­ni­ties. Larg­er firms (with $1M+ annu­al rev­enues) are stand­outs, with the high­est rates of upskilling and inno­va­tion adoption.

Oth­er for­ward-look­ing tac­tics include increas­ing job bids, enter­ing new mar­kets, and cre­at­ing new con­struc­tion meth­ods. Cut­ting prof­it mar­gins or delay­ing projects is a minor­i­ty strat­e­gy, most Pros are push­ing for­ward rather than scal­ing back.

Larg­er firms are lead­ing on mul­ti­ple fronts: up-skilling, process inno­va­tion, and tech­nol­o­gy adop­tion. For com­peti­tors, keep­ing pace with this ​“advance through uncer­tain­ty” mind­set will be critical. 

Navigating 2025: More Bids, Greater Efficiency, and a Bias for Action

When asked how they plan to meet 2025’s chal­lenges, con­trac­tors over­whelm­ing­ly cit­ed increas­ing project bids (39%) and improv­ing project effi­cien­cy (36%) as core strate­gies. This is espe­cial­ly pro­nounced among mechan­i­cal con­trac­tors, who are the most aggres­sive in chas­ing new work.

Nego­ti­at­ing bet­ter sup­pli­er pric­ing and reduc­ing oper­a­tional costs are also top tac­tics, as is redi­rect­ing resources to growth over defense.

Very few con­trac­tors (just 12%) say they’re unsure how they’ll respond, evi­dence of a sec­tor com­mit­ted to action over hesitation.

Who’s Most Optimistic? Scale and Politics Shape Expectations

Larg­er busi­ness­es ($1M+ in rev­enue) and Repub­li­can-affil­i­at­ed con­trac­tors express the high­est con­fi­dence in the new administration’s eco­nom­ic impact, with 39% of large firms and 41% of Repub­li­cans expect­ing their busi­ness per­for­mance to improve.

Mean­while, Demo­c­ra­t­ic con­trac­tors are sig­nif­i­cant­ly less opti­mistic, with near­ly half (48%) expect­ing their out­look to worsen.

This opti­mism gap under­scores how orga­ni­za­tion­al scale and polit­i­cal out­look shape both risk tol­er­ance and invest­ment appetite.

Implications for Manufacturers, Distributors, and Partners

For those serv­ing the con­trac­tor mar­ket, the find­ings car­ry impor­tant implications:

• Pol­i­cy-dri­ven mar­ket shifts will hit larg­er con­trac­tors first. Ear­ly adopters of new tech, process improve­ments, and work­force strate­gies will gain a head start.

• Firms lag­ging in adap­ta­tion risk falling behind before they even real­ize the com­pet­i­tive land­scape has changed.

• The mar­ket may tilt toward con­sol­i­da­tion if reg­u­la­to­ry and labor com­plex­i­ties keep ris­ing, favor­ing play­ers with the resources to adapt and nav­i­gate change at scale.

Action Steps: What Should Contractors and Partners Do Now?

For Man­u­fac­tur­ers and Dis­trib­u­tors, top actions to be push­ing for include efforts to:

• Tai­lor sup­port and mes­sag­ing to con­trac­tor size and mar­ket seg­ment. Larg­er and urban con­trac­tors face the biggest head­winds and the great­est pres­sure to adapt.

• Offer val­ue-added ser­vices that sup­port work­force devel­op­ment and process effi­cien­cy. These are top con­trac­tor needs for 2025.

For Con­trac­tors, invest­ments should be made to:

• Invest in upskilling and tech­nol­o­gy. Stay aggres­sive in work­force devel­op­ment and process inno­va­tion, par­tic­u­lar­ly if you’re a larg­er firm or oper­at­ing in com­plex, reg­u­lat­ed markets.

• Mon­i­tor pol­i­cy shifts close­ly, espe­cial­ly tar­iffs and immi­gra­tion. Ear­ly recog­ni­tion and rapid response are essential.

• Pri­or­i­tize effi­cien­cy and smarter bid­ding. Don’t wait for mar­ket nor­mal­iza­tion; out­pace uncer­tain­ty with proac­tive moves.

The Bottom Line:

Con­trac­tors are not back­ing down in the face of pol­i­cy and mar­ket change; instead, they’re inno­vat­ing, up-skilling, and pur­su­ing growth. The firms that move fastest, build lean­est, and adapt soon­est will emerge best posi­tioned for the next phase of indus­try transformation.

As evolv­ing poli­cies con­tin­ue to reshape the home improve­ment and con­struc­tion land­scape, under­stand­ing how con­trac­tors are nav­i­gat­ing these shifts is crit­i­cal for any­one in the val­ue chain — from prod­uct man­u­fac­tur­ers to ser­vice providers. This lat­est report uncov­ers the imme­di­ate and long-term effects of reg­u­la­to­ry changes on con­trac­tor behav­ior, project activ­i­ty, and busi­ness confidence.

Mem­bers — be sure to down­load HIRI’s full Con­trac­tor Response to Pol­i­cy Shifts study to gain strate­gic insight into the spe­cif­ic pol­i­cy areas impact­ing con­trac­tor oper­a­tions, what adjust­ments they’re mak­ing on the ground, and how your orga­ni­za­tion can align more effec­tive­ly with their emerg­ing needs.

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