Tariff tension loomed large at a recent Ontario Construction Secretariat (OCS) conference as delegates paid rapt attention to trade-war economic forecasts and worked to develop coping strategies in the wake of on-again, off-again threats from the Donald Trump administration.
The event, billed as the OCS’s State of the Industry and Outlook Conference, was held in Toronto March 6, two days after the U.S. government made good on its promise to implement 25-per-cent tariffs on many Canadian imports, with a 10-per-cent carveout for oil and gas.
On March 5, the Ontario Building Trades Council had issued a statement suggesting the tariffs could put 100,000 Canadian construction jobs at risk.
Conference speaker Robert Kavcic, a senior economist with BMO, commented on the dizzying series of threats, flipflops, retaliations, mitigation initiatives and shifting timelines that followed the initial tariff announcement by looking at his watch and saying his economic analysis was up-to-date only as of that moment.
Rather than adjust its forecasts daily, Kavcic explained, BMO has issued projections based on an assumption of 25-per-cent tariffs imposed by the U.S. for one year, with 10 per cent for energy projects, and Canadian retaliation covering $155 billion in U.S. tariffs. Under those assumptions, BMO has estimated the tariffs will reduce the previously projected real GDP growth in Canada by 1.5 per cent, to around 0.5 per cent in 2025.
Central Canada would be the hardest hit, he said, with Ontario at the bottom of the pack among provinces with a decline of 0.2 per cent.
Kavcic said the impacts he was forecasting are highly uncertain and depend on policy responses.
“The takeaway here is that trade wars are pretty much bad for everyone,” he said.
“When everything’s added up…you end up with just overall less economic activity.”
An OCS newsletter quoted the Canadian Construction Association as predicting the trade war will dampen productivity and increase building costs — affecting both homebuilding and infrastructure — in addition to putting construction jobs at risk.
“We’re actually looking at a couple quarters of negative growth this year,” Kavcic said, with GDP then rising in the second half to end up in the forecasted range of zero to 0.5-per-cent growth.
BMO observed in a newsletter its estimated growth hit is lighter than the Bank of Canada’s recent scenario, which called for about a 2.5-per-cent reduction in GDP growth for the first year.
Conference delegate Ian Cunningham, president of the Council of Ontario Construction Associations, said it was clear based on Kavcic’s analysis that a year of tariffs “in no way compares to the pandemic.”
“The key takeaway…was that the environment going forward is going to be exceedingly fluid, that you have to control what you can control and be prepared to be flexible and adaptable for those unknowns.”
Kavcic and OCS director of research Katherine Jacobs commented that both the federal government and the Government of Ontario have pledged investment supports to bolster economic output.
“Certainly, if tariffs stick for any period of time, the economic principles will be changing,” said Jacobs. “Private sector projects may be postponed or cancelled until that value proposition is back in place…However, both federal and provincial governments say they are there for the industry.”
The statement from the Building Trades also addressed the issue: “Every effort must be made to protect construction workers from the economic fallout of this confrontation, including major investments in infrastructure to maintain employment, stimulate greater domestic trade and connectivity, and achieve energy independence.”
Kavcic believes the Bank of Canada will react to the recessionary pressures by continuing to lower its base rate through to the summer — four times in total, reaching 2.0 per cent.
The housing market recovery in Canada was expected to be gradual prior to tariffs and would be “dampened this year by the confidence-sapping trade war, before resuming in 2026 on the lower mortgage rates,” stated BMO analyst Douglas Porter in a bulletin.
Kavcic said housing starts in Canada may be relatively stable, in the 200,000 to 215,000 range, over the next couple of years.
Another conference speaker, BuildForce Canada senior economist Bob Collins, told delegates there could be production cuts across many sectors, leading to job losses and downward pressure on the Canadian dollar.
Collins said hesitation on project decisions would be an extension of the “wait and see” approach being felt with the mere threat of tariffs.
Jacobs said the conference not only played the important role of informing stakeholders of the potential repercussions of the trade war, it also provided networking opportunities.
“That’s the really important part,” she said. “You’ve got contractors who are meeting with union reps…and that’s how you just build those relationships.”
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