The recent imposition of a 25% tariffs on Canadian goods by U.S. President Donald Trump, has raised alarm bells among various stakeholders and consumers. There may be a significant impact from these tariffs on the Canadian construction industry. This decision will significantly impact economic relations and raise concerns for many in trade and construction. Despite a 30-day pause for discussions, industry stakeholders worry about long-term effects on costs and supply chains. They fear uncertainty may derail ongoing and future projects, threatening economic stability.

What the Construction Associations are saying about Tariffs on the Canadian Construction Industry:

The Canadian Construction Association (CCA) has voiced its disappointment over the tariffs. They are emphasizing the potential disruptions to critical project requirements and supply chains. Supply chains that are vital to the industry’s smooth functioning.

Rodrigue Gilbert, CCA President, stated, “Canada’s construction industry is disappointed to see the imposition of tariffs. We appreciate that the federal government has issued a strong response to President Trump’s senseless tariffs and will hold consultations with industry on further measures.” This sentiment is echoed across multiple sectors within the industry. Many highlighting a unified stance against the tariffs that could lead to widespread ramifications if not addressed promptly. Moreover, the imposition of such tariffs could potentially alter the landscape of trade relations. This could prompt stakeholders to consider long-term strategies for coping with this new reality.

The Toronto Construction Association (TCA) has also voiced concern on their website. They state “this trade war is not going away any lime soon. Trump is prone to drama as we know and his threats relating to NAFTA during his last term as President were bad but not devastating by the time the new trade agreement was signed.

A Growing Trade Deficit

Since then, the U.S. frade deficit with Canada has grown from $31 bilion to closer to $100 billion. That’s the real reason for the trade war. The cross-border fentanyl distribution argument was a means to an end and was presumably used to justify the emergency measures legialation. Our best guess is that this new trade war will have severe and enduring impacts on TCA members.”

Similarly, the Residential Construction Council of Ontario (RESCON) highlighted the challenges posed by these tariffs. RESCON President Richard Lyall noted, “The residential construction industry is already challenged. The move is reckless and will cause economic hardship in both the U.S. and Canada. Affecting tens of billions of dollars of trade in construction materials alone.” This statement underscores the interconnectedness of the two economies. It reveals how policies such as these can trigger widespread implications that reach far beyond the construction industry. Unfortunately, this will also impact the everyday lives of citizens who depend on these projects for jobs and housing stability

Potential Impacts of Trump’s Tariffs on the Canadian Construction Industry

Tariffs on essential construction materials like steel, aluminum, and lumber are expected to increase material costs significantly. The Canadian Home Builders’ Association (CHBA) warns that such increases could exacerbate the existing housing affordability crisis, making it more difficult for average Canadians to achieve home ownership, especially as prices for essential goods rise in tandem with these tariffs.

The integrated nature of the U.S.-Canada construction supply chain means that tariffs could lead to delays and shortages, adversely affecting project timelines and budgets. This disruption may, in turn, threaten partnerships with international suppliers. Utlimately, motivating stakeholders to reevaluate their current frameworks to preserve their competitive edge. Others may start potentially seeking alternative sources of materials that could add complexity to their supply chains.

Reduced exports due to tariffs may slow economic growth, leading to decreased investment in residential construction and potential job losses. This economic slowdown could create a chain reaction, resulting in lower consumer confidence and reduced spending across various sectors, ultimately placing additional strain on the workforce that relies heavily on construction-related jobs for their livelihoods.

What Ferrari & Associates is Saying about Tariffs

Our Vice President of Construction Insurance has spoken with some of our construction partners, and offers this advice to our construction contractor clients:

“Seek alternative suppliers in countries not subject to tariffs. This can mitigate cost increases and ensure greater resilience against market fluctuations. By broadening your supplier base, you may be able to protect your bottom line from potential price hikes and ensure a more stable inventory of materials that are critical for your ongoing projects.” 

Construction companies should examine existing agreements for clauses that allow for price adjustments due to increased material costs, as this proactive step could provide some legal grounds for negotiating better pricing terms in light of the new tariffs. Strengthening existing contracts may also foster better relationships with suppliers, who may look for opportunities to work collaboratively during these turbulent times.

We expect that the CCA, TCA and RESCON will try to engage with government bodies to seek relief measures, such as exemptions for essential construction materials from retaliatory tariffs. Strong lobbying efforts may create a unified voice that highlights the critical need for government intervention in protecting vital industry interests, particularly in a time when the very foundations of the industry are being questioned.

Canada’s Response to Tariffs on the Canadian Construction Industry

In response to U.S. tariffs, Canada has announced retaliatory tariffs of 25% on $155 billion worth of U.S. goods, with $30 billion taking effect on February 4, 2025, and the remainder to follow. These measures could further complicate trade relations and impact the availability and cost of materials essential for construction projects. Perhaps Prime Minister Trudeau’s retaliatory tariffs will put the trade war into perspective. Meaning, there are multiple sides to this and Canadians are not going to go down without a fight.

We appreciate that there is uneasiness with all of this. Without a doubt, these tariffs on the Canadian construction industry present significant challenges for contractors and developers. But these challenges will inevitably prompt urgent discussions about the future of cross-border trade and investment. This is especially true in the face of growing economic uncertainty. Proactive measures and collaborative efforts between industry stakeholders and government entities may be crucial. We must try to mitigate the adverse effects of these tariffs on the Canadian construction industry and ensure the sector’s resilience against potential setbacks.

This trade war will not only effect the construction industry. Only time will tell the short-and-long-term impact on Canadian consumers. As the industry braces for the impending changes, it becomes imperative to develop effective strategies that not only navigate through this turbulent period. While there is no magic solution, Ferrari & Associates remains committed to working with our clients to mitigate their risk. As we are now in the bidding season, Ferrari & Associates is your partner for bid and tender bonds, subdivision bonds, and other types of bonds your business requires. Please check out our Bonding page, or click here to fill out our bond request form.