As the U.S. trade tariff dispute looms, construction businesses face uncertainty and potentially significant financial risks.

Since assuming office, U.S. President Trump has signed a rash of executive orders, imposing a punitive 25 per cent tariff on all Canadian imports, including steel and aluminum, and a 10 per cent tariff on energy products. Canada is responding with retaliatory measures.

While there’s a 30-day pause between the countries, the potential impacts are too significant to ignore.

The tariffs threaten to disrupt established supply chains, increase project and material costs and put more strain on an industry already facing tough market conditions.

The tariff uncertainty is creating “chaos,” stated Louis-Philippe Champagne, associate vice president, Canadian Construction Association during an industry webinar.

He said the tariffs will have two very significant indirect impacts on construction. First is the economic contraction and damage on both Canada and the U.S., leading most likely to a recession if the tariffs are sustained for several months. It will also mean less investment into projects due to owner concerns over risks.

Secondly, “most of our construction product comes from the U.S. We have a very integrated supply chain, not just in construction but Canada,” said Champagne. “The contraction of the economy created by the tariffs and then our dependence on the U.S. market will mostly likely have an impact on price.”

Finding solutions to offset the fallout from the tariff threats are made more complicated because of the interprovincial trade barriers in Canada, which hinder the movement of goods across the country. The interprovincial trade barriers impose the equivalent of a 21 per cent tariff on goods across Canada, noted Champagne.

“The way our legislation and trade infrastructure is built, it is easier to send product to the U.S. from Vancouver for example, and then buying it back in Quebec – in Ontario than it is to cross the country internally with our own materials,” he explained. “This is something the government can tackle and we’re working with them to see changes.”

But even if the trade barriers are removed or minimized, another challenge is Canada’s poor infrastructure that has “been bottlenecking Canadian resources.”

“The core challenge remains our infrastructure. We have a significant underinvestment in trade infrastructure,” said Champagne.

B.C. Construction Association president Chris Atchison stressed that the industry needs to work together to find solutions and be prepared to address the emerging threat.

“While we can’t change the decisions that are being made across the border, we can control how we prepare, how we protect our workers and how we work together to find solutions,” he said.

Atchinson shared that industry members are concerned and are calling for reduction of interprovincial trade barriers; financial assistance and subsidies for affected materials; and prompt payment legislation to mitigate tariff impacts.

Another key to reducing the tariff impacts is to carefully examine and fully understand the provisions set out in contracts, said Tyler Galbriath, partner Jenkins Marzban Logan.

He emphasized this is a time to be united, not divided and that there is no “silver bullet” or one-size-fits-all answer to the tariff threat.

“Have that open, frank and honest conversation with the person you’ve contracted with….go over contract by contract,” said Galbraith.

He advised that CCDC and CCA contracts have provisions, such as the section 10.1.1 and 10.1.2 of the CCDC 2, which contain tax and duty change protections. But if contractors are not using CCDC, they need to understand their contract.

For new projects, contractors have to ensure there is a tariff provision/adjustment clause in the contract to be adequately protected or decide to bid “with eyes wide open.” Galbraith also noted that force majeure is not a solution – “it only gets you time, not money.”

Champagne concluded by saying this potential trade war is a “wake up call” for the federal government. “Canada needs to rethink its dependence on the U.S. CCA has been advocating for quite some time for investment in trade infrastructure into our port and railroad and roads. This is long-time overdue,” he said. “In order to be able to rely on ourselves much more and buy our own steel – buy our own wood, we will need to see some significant investment and changes to policy.”

Since the webinar, the list of American tariffs now could potentially include a 25 per cent levy on lumber and forest products.

Cheryl Mah is managing editor of Construction Business.