Canada’s construction industry braces for Trump impact

The new year began with serious uncertainties for Canadian contractors. It started with the sudden resignation of Justin Trudeau, the prime minister, in January, sparking a leadership race in the ruling Liberal Party.

As we saw in Germany and elsewhere, when a country is leaderless, public morale and confidence in the economy suffer.

Then came the inauguration of Donald Trump as president, followed by the imposition of 25% tariffs on most goods in February, their month-long pause, their reimposition in March, followed by yet another pause. There has been months of speculation on the impact they will  have on both sides of the border.

There is turmoil on other fronts. The Canadian economy has been heavily dependent on immigration. International students paid higher tuition fees, competed for living space (which is in short supply) and invested in the local economy. The recent cuts to international student programmes can be felt as universities and colleges are closing doors to many programmes that catered to foreign students.

As a contractor, we’re seeing heavy machinery stolen from job sites, which is pushing up the cost of insurance. Is understaffing a root cause? Updating the risk registry for projects was a routine monthly task before. Now, we’re constantly changing risk simulations to be on our toes at all times.

Contractors must learn how to build a different kind of resilience. This is when relationships undergo a true test. Can we make it? I am certain that after the pandemic, we can adapt to anything.

But we should learn from the 2021 Crosslinx v Ontario Infrastructure case, where Justice Koehnen highlighted the importance of dealing with matters as they arise and not deferring disputes until substantial completion. This strains the financial capacity of contractors.

There has been an increase of 28.6% in business insolvencies from 2023, with construction firms top on the list. As contractors, we need to capitalise on relationships that have been forged in steel – enduring and resilient. We have to be more collaborative and help each other. Contracts have to be fair and reasonable and weigh risk according to capacities of the local market
and performance.

There needs to be more investment in reviewing risks and ensuring the conditions laid in the contract are properly understood. There can be no scope gaps. Seasons must be considered when preparing schedules.

Before the tariffs chaos of February and March, prices for local construction materials had already begun creeping up by as much as 4%. Now, we’re waiting to see if Trump will go through with his threats, pause them again, or change course entirely.

Normally we get price sheets in early January, but suppliers held their cards close to their chests through February and March. We’re also waiting to see how negotiations with local carpenter unions go.

The old habit of bidding low to buy work and trying to make it up later with change orders is as strong as ever, and the only ones doing well out of it are lawyers.

Instead of doing that, contractors should take a proactive approach and start sending notices that will trigger the renegotiation of prices and schedules. Clients should understand we’re in this together and be willing to respect clauses that deal with unforeseen conditions. 

Contractors don’t typically have research and development divisions, but we can do more to stay competitive, for instance by investigating techniques such as prefabrication, and adopting information technology that makes us more productive.

We could also learn from Australia, where government clients have begun dealing directly with contractors performing the work instead of going through general contracting middlemen who charge mark-ups for acting as brokers. It could bring costs down and reduce the impact of tariffs.

Tariffs will have a long-term impact. They’ll shape the future of how we build. But it will not all be doom and gloom. If tariffs reduce lumber exports, and reciprocal tariffs make imports expensive, there may be opportunities to save by buying local.

There may be more opportunities for Canadian consultants and constructors in markets such as infrastructure and commercial projects, currently dominated by US and other foreign companies.

The Liberal Party leadership election was won by former Bank of England governor Mark Carney, who becomes prime minister – until the next federal election, on a date to be confirmed later in 2025.

Canada’s victory in the 4 Nations Face-Off ice-hockey tournament in February was a great morale booster and united the country in face of great challenges that lie ahead.

With the uncertainty of what the future holds, being efficient, proactive, enduring, resilient and collaborative will be the difference we can make. Hopefully, this is just a hurdle and not a start of horrors.

Hamza Momade MCIOB is director of special projects at Canada’s Roni Group, and a part-time professor of construction at Durham College, Ontario.