US Tariffs on Canadian Imports: What Contractors Need to Know
For years, contractors have relied on Canada as a dependable source for essential building materials like lumber, steel, and aluminum. The close proximity, shared language, and free trade agreements like NAFTA (now replaced by USMCA) made cross-border trade relatively smooth. The assumption was simple: a reliable supply chain and stable pricing.
But then came the tariffs. The US, under different administrations, has repeatedly targeted Canadian imports with tariffs — sometimes up to 50% — on key construction materials. Reuters, March 2023. Lumber prices, for example, spiked dramatically during trade disputes in 2017 and 2018. The recent rounds of trade tariffs have revived those concerns, making it harder for contractors to stick to budgets, win competitive bids, and maintain healthy margins.
What Changed?
The latest round of tariffs on Canadian imports, particularly lumber and steel, has shaken the contractor community. According to the Financial Post, July 2023, these tariffs have increased costs by up to 37% for certain materials, forcing many small and medium-sized contractors to scramble for alternatives.
These tariffs are typically imposed to protect domestic industries from foreign competition or as part of broader geopolitical disputes. However, the construction industry often bears the brunt of these policies because of its reliance on imported raw materials. The ripple effect is undeniable — higher costs for contractors mean higher costs for clients, which in turn can lead to project delays, decreased demand, or even abandoned projects.
The situation is exacerbated by inflationary pressures and supply chain disruptions caused by the COVID-19 pandemic. Even as global markets recover, the addition of tariffs creates volatility in material costs. Contractors must now factor in unpredictable price swings, making accurate project budgeting and cost control more challenging than ever.
Why the Old Belief Persisted
For a long time, the US-Canada trade relationship was stable. Materials flowed smoothly, and pricing was predictable. Contractors operated as if this would continue indefinitely. This assumption was reinforced by the perception that tariffs were political posturing, something temporary that wouldn't really disrupt long-term supply chains.
And there’s the issue of inertia. Once you’ve built relationships with suppliers, switching to new ones is painful. It disrupts everything — approval processes, delivery schedules, trust, and even compliance requirements. Many contractors, especially smaller ones, stuck to their Canadian suppliers, hoping the tariffs would be short-lived. They weren’t.
Another layer of complexity is that contractors often underestimate the depth of impact tariffs can have. Many assume that tariffs only affect the raw material cost. In reality, tariffs influence shipping, customs duties, taxes, and insurance costs, leading to a cascading effect on total project expenses.
What We Do Differently Now
So what’s the move? How do you manage these fluctuating material costs without tanking project profitability?
1. Lock in Rate Contracts Before Projects Begin
One of the smartest moves is negotiating rate contracts for high-volume materials upfront. This isn’t groundbreaking, but it’s shockingly underused. JobNext has a rate contract feature that lets contractors secure pricing for materials like lumber, steel, and cement before mobilization. By locking in prices early, you protect yourself from sudden tariff hikes during project execution. It also ensures your initial estimates align with actual procurement costs, so you don’t end up bleeding money halfway through the job.
How to Implement:
- Identify materials that account for the largest portion of your budget.
- Work with suppliers to negotiate long-term contracts with fixed prices and built-in adjustments for tariffs.
- Use procurement software like JobNext to track contract terms, renewal dates, and usage metrics.
An illustrative example: Imagine you’re managing a residential housing project that requires 1,000 tons of steel. You negotiate a rate contract with your supplier in Canada at $700 per ton, inclusive of potential tariff adjustments. Even if tariffs suddenly increase by 20% mid-project, your costs remain fixed because you’ve locked in the rate.
2. Diversify Your Supplier Base
Relying on a single country for critical materials is risky. The US tariffs on Canadian imports are a stark reminder of this. Diversifying your supplier base to include domestic options or suppliers from countries not affected by tariffs can save you in the long run.
How to Implement:
- Research alternative supplier regions. For example, countries like Mexico, India, and Turkey are emerging as competitive suppliers for steel and other materials.
- Evaluate total landed costs from each supplier, including shipping and customs.
- Use tools like JobNext’s vendor directory to vet suppliers for certifications, compliance, and reliability.
Comparison: Domestic vs. International Suppliers
| Criteria | Domestic Suppliers | International Suppliers |
|---|---|---|
| Tariff Exposure | None | Varies by country |
| Shipping Costs | Lower | Higher |
| Lead Times | Shorter | Longer |
| Price Stability | Stable but often higher | Fluctuates |
| Compliance Burden | Easier | Requires verification |
3. Monitor Expiry Dates on Contracts
Tariffs are unpredictable, but rate contracts have fixed expiry dates. If you’re not tracking these dates, you’re leaving money on the table. As tariffs fluctuate, renewing contracts at the right time can make or break your margins.
How to Implement:
- Create a centralized database for all rate contracts.
- Use software tools like JobNext’s procurement module to automate expiry tracking and renewal alerts.
- Analyze utilization rates before renewing contracts to avoid overcommitting.
4. Understand INCOTERMS and Landed Costs
Tariffs and trade barriers don’t just affect the base price of materials; they influence shipping, insurance, customs, and other costs. Contractors often underestimate the impact of these additional charges.
How to Implement:
- Familiarize yourself with INCOTERMS 2020. For example, under DDP (Delivered Duty Paid), the seller handles all duties and taxes, while under EXW (Ex Works), you’re responsible for everything, including transport and customs.
- Use procurement tools like JobNext to calculate total landed costs for each supplier and shipping term.
5. Use Structured Procurement Workflows
Manual procurement processes often fail to account for hidden costs like tariffs. A structured workflow — from material requisition (MR) to request for quotation (RFQ) to purchase order (PO) — ensures you don’t miss critical details.
How to Implement:
- Standardize your procurement process using software tools.
- Automate approval chains to reduce errors and ensure compliance.
- Maintain an audit trail of all procurement activities for traceability.
Final Thoughts
If you’re facing rising costs due to tariffs, don’t just accept margin erosion as inevitable. Tools like JobNext can help you negotiate smarter contracts, diversify supplier bases, and manage procurement efficiently. Start your free trial today →
