How to build contractor loyalty despite the impact of tariffs

It’s no surprise that changes to the U.S. tariff policy are on everyone’s minds right now as channel leaders try to predict the impact of tariffs. While it’s affecting many industries, the uncertainty is especially strong in the building supply industry, which heavily relies on imported products that will be subject to the new tariffs.

In this ever-changing environment, the need to build and maintain strong contractor relationships is more critical than ever. But how can distributors keep up these relationships while protecting their business from increased costs?

Contractor loyalty programs are still the best way to maintain relationships, but to stay relevant the loyalty program must address contractor anxieties, deliver meaningful value and foster trust-based partnerships. 

Let’s explore how tariffs are impacting contractors and how distributors can reimagine their contractor loyalty programs to adapt to the times.

The impact of tariffs and economic uncertainty on the building supply industry

U.S. tariff policy is currently in a state of flux. As of March 4, 2025, imports from Canada and Mexico are subject to a 25% tariff, with Canadian energy products facing an additional 10% duty. These large-scale changes, which occurred in a short amount of time, have left the building supply distribution sector scrambling to respond to the resulting challenges and opportunities. And there’s still a lot of overall uncertainty about the long-term effects of tariffs on the economy (not to mention how long the tariffs will be in place). 

In Baird-MDM’s 4Q24 Industrial Distribution Survey, approximately 300 U.S. and Canadian distributors reported mixed feelings about the effects tariffs would have on their business. 54% of respondents felt optimistic about pro-business policies like deregulation and reducing business costs, but there was significant concern about tariffs squeezing margins and persistent supply chain disruptions.

Many distributors cite tariffs as their biggest concern because they expect them to increase costs, compress margins and create unpredictability in their business operations.

In the construction and building materials sectors specifically, distributors might need to choose between decreasing profit margins (which hurts the business) or passing on costs to end customers (which could damage customer relationships or delay projects).

It's also likely that historically loyal contractors will start price and inventory shopping. Distributors will need to find new ways to keep them loyal.

In short, distributors need to navigate a tricky market to maintain profitability while protecting customer loyalty.

Industries weigh in on the broader effects of tariffs on the economy 

While the economic policy is still evolving, several industry organizations have commented on the current tariffs, their impact on the manufacturing and distribution landscape and how to approach the market uncertainty they’re causing.

Electrical

Both the National Association of Electrical Distributors (NAED) and the National Electrical Manufacturers Association (NEMA) highlighted the importance of encouraging domestic manufacturing, strengthening the energy system and creating well-paying jobs. NAED also emphasized the need to balance trade and tariff policies to promote a resilient supply chain and strong electric grid. NEMA advocates for more predictability in the new policies through the addition of reasonable transition times for large-scale manufacturing and supply chains to adjust.

Wholesale distribution

The National Association of Wholesaler-Distributors (NAW) also acknowledged the intent of tariffs is to make the U.S. economy more resilient, but they are concerned economic realities make them harmful long term. Because Canada and Mexico are key trading partners, the tariffs on them risk cash flow challenges, supply chain disruptions and increased inflation.

Lighting

The American Lighting Association (ALA) echoes NAW’s concerns about Canadian and Mexican tariffs, as well as the additional 10% tariff on Chinese imports. They stress these tariffs will significantly increase costs and reduce competitiveness for lighting manufacturers and retailers, who often need to import many products and components that are difficult to source elsewhere. They recommend targeted trade negotiations to find alternative economic policies that protect national security and the economy without hurting key industries.

Manufacturing

The National Association of Manufacturers (NAM) expressed concern about how tariffs will strain manufacturers’ resources since they operate on thin margins already. They stress the importance of comprehensive strategies for domestic manufacturing growth and resource allocation, including tax reform, regulatory certainty and a stronger manufacturing workforce to fill vital open roles in the industry.

Contractor loyalty programs help tariff-proof your business

ITA Group’s experts have been following the tariff discussion closely, and we think one of the best ways to prepare for uncertainty is by strengthening your contractor loyalty programs. These programs are a proactive way to stay connected with contractors, addressing their concerns and protecting your business.

Evolving your contractor loyalty program from a simple transactional model to a comprehensive value-driven partnership can significantly enhance your business relationships.  

By offering points for every dollar spent, you go beyond merely rewarding purchases and demonstrate a commitment to giving back to those who consistently choose your business. It fosters a sense of partnership and encourages long-term loyalty. A points system can also provide a financial buffer for contractors, helping them manage costs in unpredictable times.

To maximize the impact of your loyalty program, integrate it with your pricing strategies, service offerings and supply chain solutions. Allow contractors to redeem points for what matters most to them, whether it's additional products, services or business support. The flexibility enables you to meet diverse needs across your contractor base. Additionally, use the data from points tracking to gain insights into purchasing patterns and preferences, continually refining your offerings to better serve your contractors.

By combining a points-based rewards program with comprehensive support, you'll differentiate yourself, creating a unique value proposition that transcends price comparisons. This approach helps you and your contractors thrive in any economic climate. 

Related: Why contractor loyalty programs empower wholesale distributors

7 key strategies and considerations when adapting contractor loyalty programs 

1. Evaluate tariff exposure

Identify the percentage of total sales tied to tariffed imports, then integrate this data into your loyalty program strategy. Understanding tariff impacts lets you create targeted loyalty incentives that offset potential price increases for affected products. And the data allows you to optimize your product mix, even shifting toward less tariff-affected products if necessary.

2. Enhance value propositions

Clearly communicate program benefits and any changes to local distribution teams, contractor customers and supporting manufacturers. Shared understanding builds alignment and trust.

3. Reward loyalty with relief measures

Introduce program elements such as tariff-relief discounts or service credits for long-term contractors and high purchase volumes.

4. Educate and empower

Include tariff-related insights, alternative sourcing options and cost management strategies in your loyalty program. Webinars, resource guides and free access to industry experts will show your intent to help them stay proactive.

5. Prioritize top-tier members

Provide exclusive benefits like expedited shipping, guaranteed stock and priority access to scarce materials to your best customers. This gives reassurance that you’ll take care of them during any supply chain instability.

6. Maintain transparent communication

Keep contractors informed about any tariff-driven price adjustments you need to make and explain how you made your decisions. Transparency fosters trust and mitigates backlash.

7. Adjust program incentives

Adapt payout structures, goal values, tiered earnings or product mix incentives to balance contractor needs with operational realities.

Related: How distributors can create a successful contractor loyalty program

Contractor loyalty is vital to withstanding market uncertainty

Tariffs and economic unpredictability are likely to persist for the near future, but building supply distributors can work through these challenges through strong value propositions, transparent communication and adjusted loyalty programs that build strong relationships.

The key is to shift from transactional loyalty programs to a more strategic approach that builds trust, delivers holistic value and reinforces brand commitment. This allows distributors to be prepared to deal with tariffs while safeguarding their own bottom line.

With the right loyalty program to meet economic concerns, distributors can emerge from the uncertainty as indispensable allies in their contractors’ success.

Discover how one building supply company used incentives to grow year-over-year sales for more than a decade.