As most Canadians are well aware, the U.S. imposed tariffs on Canadian goods on February 1, prompting Canada to enact retaliatory tariffs. A temporary 30-day suspension was announced on February 3. On March 4, both nations implemented tariffs then temporarily paused tariffs on USMCA-compliant goods.
Events continue to be fluid and further trade policy changes remain likely.
Risks to the Construction Industry
Many Canadian construction projects rely on U.S.-sourced materials, making them directly vulnerable to these trade measures. Additional indirect impacts arise from the highly integrated nature of North American commerce and supply chains.
Key risks to the construction industry include:
- Material cost increases: Tariffs have already been applied to certain U.S. products, such as lumber, lighting, interior finishes and furniture. Other construction products are identified on the list of potential March 25 tariffs.
- Supply chain disruptions: Delays and shortages may arise as suppliers adjust pricing and logistics.
- Labour and skilled trade shortages: Rising costs and economic uncertainty may impact hiring and workforce availability.
- Investment hesitation: Project owners may choose to scale back or delay projects due to increased financial risks, which could impact overall project costs longer term.
- Contractual and procurement risks: Fixed-price contracts are particularly vulnerable, requiring careful review of cost-escalation provisions.
- Overall economic impacts: Canadian businesses reliant on cross-border trade will likely see reduced demand from U.S. buyers due to increased prices, thus impacting their growth in Canada.
It’s important to highlight that under most contract forms, including standard consultant and Canadian Construction Document Committee (CCDC) contracts, the project owner typically bears the risk of tariff cost increases unless contract provisions state otherwise.
Mitigation Strategies
To minimize the impact of tariffs, we recommend that owners work with their project leaders and teams to assess risks proactively and consider implementing the following strategic mitigation measures.
1. Procurement and supply chain adjustments
- Where possible, procure materials ahead of anticipated tariffs or shortages.
- Diversify suppliers by identifying alternative domestic or international sources to reduce dependency on tariffed goods.
- Buy strategically and lock-in bulk orders or negotiate supplier agreements to hedge against further cost escalations.
2. Financial and project feasibility planning
- Increase budget contingency allowances to make more room for unexpected cost increases.
- Assess whether alternative design solutions may be more appropriate in terms of product availability or cost.
- Keep informed on economic indicators and potential policy changes and evaluate project cost forecasts and timelines accordingly.
3. Communication and advocacy
- Work with your project leaders and/or project teams to maintain active discussions with key suppliers and lenders regarding cost impacts.
- Ensure your project teams are aligned on evolving risks.
Given the uncertainty surrounding tariffs and trade negotiations, we are closely monitoring developments and will continue to provide updates and guidance.
Our advisors and project managers are actively working with clients across Canada to help mitigate potential tariff impacts.
