By: Taylor Moroz, Troy Baril, and Chad Eggerman

The construction industry, which continues to grapple with the fallout from the pandemic’s supply chain disruptions and rising inflation, now faces an additional layer of uncertainty due to escalating trade tensions. A series of tariffs, initially proposed by the U.S. and countered by Canada, have significant potential to disrupt the construction sectors globally, with both immediate and long-term implications. As these developments continue to evolve, stakeholders within the construction and infrastructure industries must be proactive in understanding and mitigating the impacts of these tariffs.

Background: The Evolving Tariff Landscape

The tariff issue originates from political and economic decisions made by U.S. President Donald Trump, who initially campaigned on a platform of imposing tariffs on U.S. imports, particularly those from countries he considered to have “unfair” trade practices. In early February 2025, President Trump followed through on his promise, imposing tariffs on nearly all Canadian and Mexican goods. However, this initial action has since expanded globally, impacting trade relations worldwide.

On April 5, 2025, Trump introduced a sweeping new set of tariffs aimed at addressing perceived trade imbalances and protecting American manufacturing jobs. The new baseline tariff of 10% applies to all imports to the U.S. While this baseline rate applies to most countries, certain nations are facing significantly higher custom tariffs due to what the U.S. government calls “non-compliant trade practices.” These tariffs are set to go into effect on April 9, 2025, and target countries that charge higher tariffs on U.S. goods or that are purported to create barriers to trade that the U.S. considers “detrimental to its economic interests.”

Countries facing the 10% baseline tariff include (but are not limited to)[1]:

• United Kingdom
• Singapore
• Brazil
• Australia
• New Zealand
• Turkey
• Colombia
• Argentina
• El Salvador
• United Arab Emirates
• Saudi Arabia

In addition to the baseline tariff, the White House imposed tailored tariffs on approximately 60 countries identified as the ‘worst offenders.’ Among the most notable are particularly aggressive tariff rates imposed on key U.S. trade partners, examples of which may be found below:

• European Union: 20%
• China: 54% (including earlier tariffs)
• Vietnam: 46%
• Thailand: 36%
• Japan: 24%
• Cambodia: 49%
• South Africa: 30%
• Taiwan: 32%

This aggressive global tariff strategy has sent shockwaves through international markets, with many countries retaliating with their own duties and trade measures in response. Industries that rely on global supply chains, including construction and infrastructure sectors, are already feeling the pressure, as increased tariffs are expected to drive up costs on raw materials and finished goods, slowing down production and economic growth.

In response, Canada has announced retaliatory tariffs on approximately $155 billion worth of U.S. imports, including key construction materials such as lumber, home appliances, and machinery. This is a direct consequence of the U.S. tariffs and could escalate if the trade standoff continues. While the global tariff situation remains fluid, it is clear that the construction industry on both sides of the border will face significant challenges moving forward, including potential delays and increased costs for materials crucial to ongoing and future projects.

The new tariff landscape represents a dramatic shift in global trade relations, with many businesses scrambling to adjust to the new economic realities. As a result, countries, including Canada, are considering how to renegotiate trade deals and develop strategies to mitigate the economic fallout from these sweeping changes.

Direct Effects of Tariffs on Materials and Goods

The most immediate effects of the U.S. tariffs on Canadian exports are the price increases in construction materials. As of March 2025, Canada’s exports, particularly in steel and aluminum, were subject to the U.S. 25% tariff. For Canadian manufacturers of construction supplies, this has two primary outcomes: Canadian goods are becoming more expensive for U.S. importers, which could reduce demand for these products, or Canadian manufacturers will have to lower their prices to remain competitive, cutting into their profit margins. This dual pressure is already being felt by the Canadian construction industry, where the rising cost of goods could potentially lead to project delays or cancellations.

For construction projects in the U.S. that rely on Canadian materials, such as steel and aluminum, costs are also expected to rise significantly. The 25% tariff on steel and aluminum products means that U.S. construction projects that use Canadian products will have to contend with increased input costs. Even if Canadian exporters attempt to absorb the tariff themselves to maintain their competitive edge, the overall cost of U.S. projects is expected to rise.

On the Canadian side, retaliatory tariffs on U.S. imports, including steel, aluminum, and machinery, have had a similar effect. Many construction materials and machinery are sourced from the U.S., and with the imposition of retaliatory tariffs, these goods will become more expensive. These increases are already expected to add up to 1%–4% to the overall costs of residential housing projects in Canada, depending on the project’s reliance on U.S. imports. This is a significant increase for an industry already facing thin margins, potentially leading to delays or the scaling back of new construction projects.

Indirect Effects on Project Timelines and Budgets

The indirect effects of these tariffs are equally concerning for the construction industry. The increased costs of raw materials like steel, aluminum, and machinery have a ripple effect on the entire supply chain, impacting the price of finished goods. For instance, imported construction equipment from the U.S. that incorporates U.S. steel and aluminum will see its price increase, further inflating the costs for Canadian projects that rely on such equipment.

Additionally, any disruptions in the supply chain—whether due to delays at the border, price increases, or changes in demand—will exacerbate the already strained timelines for large infrastructure projects. The uncertainty surrounding the stability of the trade environment is also making it difficult for contractors to lock in prices and timelines for future projects. These uncertainties create a volatile economic environment, where construction owners, contractors, and suppliers are left navigating a constantly shifting landscape.

Long-Term Implications for the Global Construction Sector

The long-term implications of these tariffs on the global construction sector are difficult to fully assess but could be substantial if international trade relations fail to stabilize. With tariffs now extended across numerous countries, manufacturers of construction supplies worldwide may face increased pressures to either absorb higher costs or reduce prices to maintain market share. For Canadian and U.S. manufacturers, this means the risk of decreased demand in both the domestic and international markets.

At the same time, the rising cost of materials could have a similar effect on construction activity across multiple regions. In particular, residential housing developers in markets like Canada, the U.S., and Europe may face significant challenges, with already thin margins being further squeezed by the higher prices of essential construction materials. Commercial and large-scale infrastructure projects could experience similar constraints, leading to cost overruns and potential delays.

Beyond material costs, the broader economic impacts of these global trade disruptions are a key area of concern. Many economists fear that the imposition of tariffs could contribute to a global recession. If this occurs, demand for new housing and large infrastructure projects would likely decline, compounding the already fragile market conditions. In the face of such economic uncertainty, potential homebuyers and property developers may delay investments, and companies may scale back on planned construction activity.

The uncertainty caused by these tariffs could also affect long-term planning for cross-border infrastructure projects. Countries heavily reliant on international supply chains—such as those in the European Union, Asia, and North America—could experience delays in the procurement of materials, equipment, and skilled labor, pushing back project timelines. These delays could not only lead to cost overruns but also financial strain for both public and private sector stakeholders globally, further exacerbating the construction industry’s challenges.

What Industry Stakeholders Can Do Now

While the long-term outlook remains uncertain, there are several actions that construction stakeholders—owners, contractors, suppliers—can take to minimize the impact of these tariffs in the short term.

1. Review Contract Terms: Given the evolving tariff landscape, it’s crucial for both owners and contractors to revisit their construction contracts to assess how tariffs are handled. Many standard form contracts, including those by the Canadian Construction Documents Committee (CCDC), allow for price adjustments in response to tariff impositions. Contractors should ensure they have the ability to request price adjustments for material cost increases caused by tariffs, especially for key components like steel and aluminum. They may need to negotiate existing contracts or include specific tariff provisions in future agreements to address these unforeseen costs.

Owners, on the other hand, need to understand whether price escalation clauses exist in their contracts and how tariff-related increases could affect their budgets. While contractors may pass on these costs, owners should be prepared for potential higher expenses or delays. Negotiating terms to account for tariffs can help both parties manage the financial impact and keep projects on track.

2. Explore Alternative Suppliers: In light of the tariffs, construction stakeholders should look for alternative suppliers to reduce their reliance on U.S.-based products. This might involve sourcing materials from other international markets or increasing domestic production to buffer against the tariffs. Engaging with new suppliers early in the process will ensure that there is sufficient time to build relationships and secure competitive pricing.
3. Monitor Trade Developments: Given the rapidly changing nature of these trade policies, stakeholders must stay informed of any new announcements or negotiations. This includes keeping track of the progress of CUSMA renegotiations, as these could offer more clarity on future trade relations and tariff levels.
4. Assess Financial Models: Construction projects should stress-test their financial models to account for potential increases in material costs and delays. Adjusting for these changes now can help prevent budget overruns and financial difficulties down the line.
5. Engage with Legal and Strategic Advisors: Consulting with legal and strategic advisors to navigate these complex tariff issues is crucial. Legal experts can help stakeholders understand the implications of these changes and how to adjust contracts and business strategies accordingly.
6. Consider Inflation Protection: To guard against the rising costs driven by tariffs, contractors and owners should explore inflation protection clauses in contracts and consider locking in prices where possible to protect against future increases.

Conclusion

The imposition of tariffs between the United States and a range of global trading partners has created a volatile environment for the construction and infrastructure sectors worldwide, with significant implications for costs, timelines, and overall project feasibility. While some relief has been provided through exemptions and ongoing negotiations, the situation remains fluid, with numerous countries now impacted by these changes.

To navigate this uncertainty, industry stakeholders must be proactive, reevaluating their contracts, supply chains, and financial models to mitigate the impact of these global tariffs. This is especially crucial for companies involved in cross-border trade or multinational projects, where disruptions to supply chains could lead to costly delays or unforeseen expenses.

As governments around the world continue to grapple with this evolving trade landscape, the global construction industry must remain agile and well-informed, ready to adapt to both the challenges and opportunities that emerge from this turbulent period. Maintaining flexibility and seeking alternative strategies will be key to minimizing risks and capitalizing on potential market shifts in the coming months.

At Procido LLP, we help construction project stakeholders navigate the complexities of the evolving tariff landscape with confidence and clarity. Our team provides comprehensive contract review, risk management, and strategic advisory services designed to safeguard your business from the financial impact of trade disruptions. In a time of economic uncertainty, we also offer effective dispute resolution services, minimizing project delays and cost overruns. With a deep understanding of the unique challenges in the construction industry, we deliver tailored solutions to ensure your projects stay on track, regardless of external factors. To learn how we can help protect your business, please contact Troy (troy.baril@procido.com) or Taylor (taylor.moroz@procido.com) to schedule your consultation and receive a cost estimate.

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[1] The list of countries impacted by the 10% tariffs is extensive, making it impractical to include in full within this article. Instead, we have highlighted a few key examples of countries significantly affected by these tariffs.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice. Contact Procido LLP (www.procido.com) if you require legal advice on the topics discussed in this article.