How Canadian Contractors Can Navigate Tariff Risk Before It Hits Their Bottom Line

By Josh Levy, Co-Founder and CEO, Document Crunch

In a globally interconnected economy, decisions made in Ottawa, Washington, Brussels, or Beijing don’t stay there. They reverberate through supply chains, affect material costs, and send ripple effects across construction budgets from Vancouver to Toronto to St. John’s.

For Canadian construction leaders, the reintroduction of tariffs on steel, aluminum, and other core inputs, especially on goods to the United States and China, marks more than a trade policy update. It marks a fundamental shift in how risk must be managed in an already margin-thin business.

While many in the industry are rightly focused on labour, permitting, and ESG mandates, tariff exposure remains a quiet but looming disruptor. And it’s one that’s often buried inside your contracts, silently waiting to tip a project from profitable to problematic.

Why Canadian contractors are uniquely exposed

Canada’s construction industry is deeply dependent on cross-border trade:

• Canada is the fourteenth largest steel importer and in 2024 alone imported about 8.3 million metric tons, mainly from the United States.
• According to the Canadian trade Commissioner, while several products are covered under the most recent Canada-US Trade agreement, CUSMA, which still grants Canadian products tariff-free entry in the United States, under section 232 of the agreement, Canada has to pay a tariff on its steel exports to the United States.
• Many projects operate on fixed-price models or public infrastructure bids, leaving no room to absorb sudden input cost surges.

Add to this a tightening bond and insurance environment, resulting in a fragile financial stack, where one overlooked clause or missed notice deadline could derail an entire contract’s economics.

Tariff shock in action

The Canadian construction industry has already experienced what happens when tariffs outpace contract preparedness. During the 2018–19 trade tensions, retaliatory tariffs on U.S. steel and aluminum sent procurement teams scrambling, with some contractors seeing steel rebar prices spike by over 25 per cent in a matter of weeks. Many firms, especially those bidding on public infrastructure projects, had signed fixed-price contracts based on pre-tariff pricing assumptions. Without material escalation clauses or responsive change-in-law provisions, they were forced to absorb the full brunt of cost increases. In several cases, margins were wiped out entirely, leading to disputes, project delays, and in some instances, cancelled bids for future work. These real-world consequences served as a wake-up call, but many of the lessons remain only partially applied.

The real risk is in the fine print

Most construction leaders aren’t flipping through contracts daily. But buried in those agreements are clauses – or gaps in clauses – that can determine whether your company can pass on cost increases, delay a project, or even walk away safely.

Key clauses Canadian firms should be reviewing now include:

1. Price escalation provisions
   Are material cost increases tied to indices or external benchmarks?
   Are tariffs treated as a valid trigger?
2. Change in law clauses
   Do contracts cover international trade actions or only Canadian legislative changes?
3. Force majeure
   Are tariffs and trade wars explicitly included or excluded?
4. Notice provisions
   How soon should you alert your client about cost or schedule impacts?
   Are emails sufficient notice, or is formal written communication required?
5. Subcontractor flow-down terms
   Can your suppliers invoke the same protections you negotiate with the owner?

What Canadian builders should do today

The first step toward protection is clarity. Canadian contractors should be auditing their current and upcoming project contracts to assess whether key provisions such as price escalation language, change-in-law triggers, force majeure, and notice periods adequately reflect today’s economic volatility. This is especially critical for public-sector work, where rigid procurement structures often leave little flexibility once a contract is signed.

Next, field teams, procurement officers, and finance managers must be trained to spot risk flags during early project planning. Contractual protection only works when those closest to the work understand how and when to trigger it. Simple tools like quick-reference clause checklists or training modules on contract escalation protocols can go a long way in embedding this awareness across departments.

Forward-looking negotiation practices are equally critical. Instead of treating tariffs as edge cases, contractors should treat them as recurring risk scenarios. Escalation clauses should directly reference trade policy impacts and point to neutral indices, such as the Canadian Construction Association’s Commodity Benchmarks or the Raw Material Price Index from Statistics Canada, to justify pricing adjustments.

Risk management also relies on internal alignment. Estimators, legal advisors, and executive teams must define clear thresholds for what constitutes an “acceptable” level of tariff exposure and determine in advance how they’ll respond if those thresholds are breached. These discussions should become part of pre-bid risk assessments, not afterthoughts during procurement chaos.

Finally, relationships with suppliers and manufacturers must evolve. It’s no longer enough to secure the lowest bid; companies must understand how vendors are managing their own tariff exposure. Collaborative approaches such as flexible delivery terms, price hold guarantees, or shared contingency planning can reduce volatility for everyone involved.

Looking ahead: Resilience, not just reaction

Tariff volatility has become a persistent feature of the modern trade environment. Adapting to this reality requires more than supplier diversification or material planning; it demands a contractual and operational framework that anticipates and mitigates external shocks. With infrastructure investments at record levels and major projects on the horizon under the One Canada Bill, construction leaders must scrutinize contract language with the same rigor they apply to cost or schedule planning.

Resilience depends on preparation. That means aligning legal, estimating, and procurement functions around clearly defined thresholds for tariff risk, embedding awareness across teams, and negotiating protections that reflect today’s trade environment.

To move toward an industry where construction contracts are a source of alignment rather than conflict, and disputes can be driven down to zero, stakeholders must prioritize clarity, consistency, and shared understanding at the outset of every project. Minimizing disputes and ideally eliminating them is not an abstract vision; it is an achievable outcome when risk is addressed upfront and contracts are designed to protect all parties involved.