The recent imposition of a 25 per cent tariff by the U.S. government on Canadian imports, encompassing critical construction materials such as steel, aluminum and lumber, is poised to have profound implications for Canada’s heavy construction industry. The tariffs were invoked under the U.S.’s International Emergency Economic Powers Act, which imposes tariffs against Canada, Mexico and China.
On Feb. 4, President Donald Trump temporarily paused the imposition of tariffs on Canada and Mexico after negotiation with its leaders. In turn, Canada also agreed to pause retaliatory tariffs on U.S. goods. The tariffs were in effect for only two days before President Trump reconsidered his decision and postponed them for a month, delaying the 25 per cent tariffs on many Canadian imports until April 2. the U.S. president is maintaining the 25 per cent tax on steel and aluminum imports, which is a growing concern for the industry. The last time such tariffs were imposed on aluminum, exports dropped by almost half in 2019.
In response, Canadian Prime Minister Justin Trudeau has confirmed that Canada’s initial retaliatory tariffs of 25 per cent on $30 billion Canadian in U.S. imports will remain in place, with plans to extend these measures to an additional $125 billion in the coming weeks, until this dispute is resolved. This trade war will affect various economic facets, including trade dynamics, investment decisions and overall market stability.
Canada ranked second and represented 14.3 per cent of the total trades in the U.S. in 2024, according to the United States Census Bureau. Moreover, according to the Canadian Chamber of Commerce, 34 U.S. states rely on Canada as their top export destination, with almost half of all trades happening between related businesses. The tariffs will create economic challenges to the two countries, which have been long-term partners.
A paper published by the International Monetary Fund in January 2024 analyzed the macroeconomic consequences of import tariffs and pointed out many negative impacts such as depressed trade, investment and output, higher consumer prices, reduced global competitiveness, job losses for industries dependent on supply chains (2.3 million Canadian jobs are supported by exports to the U.S. and 1.4 million American jobs are supported by exports to Canada, according to the Canadian Chamber of Commerce), reduced economic growth, lower economic productivity and worsening of long-term economic conditions.
“Now is the time to double down on protecting our economic sovereignty and security. Recent announcements from the federal and provincial governments on internal trade are steps in the right direction, but what we do in this moment can’t be incremental, it must be transformational,” said Candace Laing, president and CEO of the Canadian Chamber of Commerce. “To build a resilient, self-reliant and future-proof economy, we need to diversify our trade partners, revamp the tax and regulatory system, and do even more to streamline internal trade. Canada is resource and talent rich.
Our economic future is ours to determine – it’s time to join our economic strategy with concrete action to not only minimize the short-term damage but to chart a more prosperous path long-term.”
What does that mean to the construction industry in the U.S. and Canada?
The uncertainty surrounding tariffs, particularly those recently imposed by the Trump Administration, has significant implications for the global economy. This unpredictability affects various economic facets, including trade dynamics, investment decisions and overall market stability.
For the construction industry, tariffs on essential materials like steel and aluminum translate to increased costs for contractors and developers. Canadian suppliers exporting to the U.S. may face reduced demand due to higher prices, while American firms relying on Canadian materials may be forced to source alternatives at potentially higher costs. The resulting price volatility can disrupt project planning, timelines and budgets, ultimately impacting profitability.
Catherine Cobden, president and CEO of the Canadian Steel Producers Association (CSPA) said the tariffs are unwarranted and will bring “painful economic repercussions to both American and Canadian workers.” She says Canada has been the U.S.’s most steadfast trading partner for decades including under the United States-Mexico-Canada Agreement (USMCA) signed in 2020.
“The entire North American steel industry has benefited greatly from the USMCA. Beyond that, Canada has worked to align itself with the United States on trade measures to protect our respective steel industries from unfair trade, including 25 per cent tariffs on China, deeply enhanced import monitoring and ensuring that over 95 per cent of the steel supplied by Canada to the United States has originated in the USMCA region,” she said.
“Today’s entry into force of tariffs is just days ahead of another expected round of tariffs for Canada’s steel and aluminium sectors that will cause further grave concern for the tens of thousands of Canadian workers … Combined, these tariffs would put Canadian steel at a 50% tariff rate when entering the United States, which is a comparable tariff level to some of the worst global steel trade offenders such as China. It is completely shocking for the United States to treat a long-time and fair trading partner in this manner.”
Cobden says that while they applaud the Government of Canada for the immediate retaliation, steel must be included at the same tariff level as the U.S. and that all governments in Canada need to step up the support for the domestic industry.
The effects of these tariffs extend beyond trade relations. Higher material costs can lead to project delays or cancellations, particularly in infrastructure and large-scale developments. Additionally, Canadian firms that depend on U.S. exports may struggle with reduced competitiveness, affecting employment and overall economic stability within the sector.
“The Canadian and American construction industries rely heavily on free-flowing supplies of essential construction materials. These needless tariffs will decrease productivity, harm economic growth and put critical projects and countless construction jobs at risk – on both sides of the border,” said Rodrigue Gilbert, president of the Canadian Construction Association (CCA). “Once again, the new U.S. administration clearly demonstrates that they have a limited understanding of how damaging these measures will be on the integrated economy between our two countries.”
The CCA warns that these tariffs pose a major risk to the construction industry. This could lead to higher costs for homebuilding and infrastructure projects, disruptions to supply chains and trade relationships, and a decline in economic development and productivity.
“This is a time where we need all Canadians to stand up for Canada. This is not the time to sit on our hands – we all have to work together to increase productivity and support Canadian businesses, so that we can all build a stronger Canada and surmount this trade conflict,” said Gilbert.
On the other hand, some U.S.-based manufacturers of construction materials could see short-term benefits, as domestic production may become more attractive due to higher import costs. However, industries reliant on cross-border supply chains may find themselves grappling with higher operational expenses, diminishing any initial gains. Increased costs on both sides of the border could slow construction activity, potentially reducing demand for materials and labour.
Beyond the immediate financial burden, tariff uncertainties can dampen investor confidence. Businesses operating in both Canada and the U.S. must weigh the risks of supply chain instability and fluctuating material costs when planning long-term projects. This hesitancy can have ripple effects on economic growth, as cautious investors may opt to delay or downscale projects until trade policies stabilize.
Looking ahead, the industry will need to adapt to this evolving trade landscape. Companies may explore strategies such as diversifying suppliers, adjusting procurement models or seeking domestic alternatives where feasible. The broader economic ramifications of these tariffs will continue to unfold, but one thing remains clear: stability and predictability in trade policies are crucial for the long-term health of the construction industry on both sides of the border.
Canadian industry leaders form council to address U.S. trade challenges
A coalition of industry leaders has formed the Canada-U.S. Trade Council (CUSTC) to co-ordinate efforts and share strategic insights. The voluntary initiative, launched on Jan. 10, brings together representatives from key sectors including steel, aluminum, forestry, oil and gas, agri-food, dairy, chemicals and banking. Major business and labour organizations, such as the Business Council of Canada, the Canadian Chamber of Commerce and the Canadian Manufacturers and Exporters, have also joined.
Since the inauguration of the new U.S. administration, membership in the CUSTC is growing rapidly. The council’s steering committee, initially led by the CEOs of the Aluminum Association of Canada (AAC) and CSPA, will hold regular discussions to assess trade developments, including tariff negotiations and the upcoming review of the Canada-United States-Mexico Agreement (CUSMA).
“By bringing together, from across Canada, industry, unions and experts, the Council provides a dynamic and timely platform to freely address issues strategies and opportunities with Government officials,” said Jean Simard, president and CEO at AAC. “This crisis is worth all our efforts, and we must seize the moment to grow Canada stronger within a safer, more secure and competitive business environment for our future.”
While the CUSTC does not function as a lobbying or advocacy group, it aims to facilitate open dialogue between industry stakeholders and government officials, ensuring a coordinated Canadian response to evolving trade policies. The CUSTC will rely on a team of seasoned advisors, including Steve Verheul, James Moore, Jean Charest, Laura Dawson, RJ Johnston and Adam Taylor – all experts with deep experience in Canada-U.S. trade relations.
“As an international union, we know that workers on both sides of the border understand the economic importance of a strong Canada-U.S. trade partnership for their families and communities. All workers are counting on all of us to protect good jobs and provide job security through a strong trade partnership, while standing up for our key industries,” said Marty Warren, national director at United Steelworkers.
To ensure ongoing collaboration, Canadian and provincial government officials will be invited to participate regularly, providing updates on key developments, sharing insights and gathering industry input. Organizations interested in participating in this council are encouraged to contact Bruce Anderson, partner at Spark Advocacy, at bruce@sparkadvocacy.ca or Taylor, partner at NorthStar Public Affairs, at adam@northstarpa.ca.
Putting Canada first
The C.D. Howe Institute assembled a Trade Crisis Working Group to assess available information and propose strategic recommendations for Canadian governments to address the threat. The group met in two sessions on Jan. 28 and 29.
The group contested Trump’s allegations that there’s a trade deficit with Canada. According to them, the U.S. “registers a significant manufacturing trade surplus with Canada, especially with respect to finished manufacturing products such as machinery, equipment and consumers goods, including autos. This U.S. manufacturing trade surplus (to which can be added a large U.S. surplus in its services trade with Canada) is, however, more than offset by the Canadian trade surplus in crude oil and in other natural resources and industrial materials. The U.S. runs a current account deficit for other reasons, which tariffs alone cannot change.”
Given the U.S.’s reliance on Canadian oil – where shifting to alternative sources would be both costly and complex – Canada has a strong case that its oil exports contribute to U.S. economic strength, security and lower consumer prices. However, as long as the U.S. maintains an overall trade deficit, Canada’s manufacturing sector remains vulnerable to tariffs, creating regional tensions that complicate the nation’s response.
Dr. Kent Fellows from the University of Calgary presented to the group and offered a critical perspective on the political and economic implications of federal government-imposed export restrictions on Canada’s oil and gas industry. Despite the sector’s strategic leverage, Fellows suggested a more economically viable alternative: Alberta reducing oil production to drive up prices, thereby sustaining revenue for both the industry and the provincial government.
The group agreed that Canada must include credible retaliatory measures in its strategy. However, many members emphasized that retaliation should be strategic and precise to avoid undermining Canada’s competitiveness.
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