The ongoing trade spat between the U.S. and Canada is impacting B.C.’s construction sector in ways that could bring short-term gain and long-term pain.
At first, there could be an oversupply of lumber if Canadian softwood is taken out of the U.S. equation, resulting in lower costs for B.C. builders and developers, said Padraic Kelly, Vancouver-based director with BTY Group.
But costs would later rise significantly, he said.
“The medium- and long-term pain would be that if the American market is choked out, mills would close, supply would be constrained and costs would ultimately go up,” Kelly said.
The total levy on Canadian softwood lumber going into the U.S. could total between 45 and 55 per cent, taking into account anti-dumping measures introduced by the Biden administration and scheduled to increase this August.
Other big-ticket impacts to B.C. construction could be the mechanical and electrical divisions within construction budgets, he said.
Although prices have already been rising steadily over the last decade, systems such as heating, cooling, ventilation and lighting could now see a layering of tariffs and counter-tariffs.
Take, for example, the motor of an air-handling unit. It may be manufactured in China and shipped to the U.S. for assembly into the unit, which may then be brought to B.C. for installation in a project.
“The question is, where do the tariffs start and end?” Kelly said, citing complex supply chains for building products and their components.
With construction firms pivoting to new suppliers in Asia and Europe, the overall cost implication for the sector could be anywhere between three to eight per cent, he said.
In the near term, costs could plateau if the market is spooked and activity decelerates.
“It would mean that trades would be forced to sharpen their pencil even further and ‘buy’ jobs to win work and keep their people busy, but again that’s not what we want. We don’t want the market slowing down. It’s slow enough as it is,” said Kelly.
Meanwhile, one construction CEO says the strong greenback had already been forcing Canadian companies to adapt.
“Already before this tariff stuff started, we were ahead of the curve,” said Omar Rawji, president and CEO of Prism Construction.
“The U.S. dollar was really strong compared to the Canadian dollar, and we were already looking at sourcing from Canadian companies and looking at different solutions.”
Rawji said B.C. companies like his have already absorbed previous shocks such as recessions and the COVID-19 pandemic.
“It was a good opportunity for us to focus on thinking about the way our business is set up, to focus our resources and energy on building our brand and business, so that we would be ready to emerge from the tough times quickly and ahead of other companies,” he said.
Separately, a March 11 analysis by the University of Ottawa’s Missing Middle Initiative considered the impact of tariffs on a basket of 85 construction inputs, ranging from insulation to appliances.
In 2023, Canada imported $12.4 billion worth of these products, 48 per cent of which were made in the United States.
The research found that if Canada imposes a 25-per-cent tariff on all the housing inputs made in America, importers would face an extra $1.5 billion in costs annually, assuming a 70-cent loonie and no changes in prices or trade patterns.
“Canadian importers may be able to respond by importing products made in other countries, but this is not often feasible and can be prohibitively expensive,” said the analysis.
