Increased US tariffs on Canada, Mexico, China likely to impact project planning
03 February 2025
The US is set to follow through with its threat to imposed tariffs of Canadian, Mexican and Chinese goods from Tuesday this week.
US President Donald Trump has separately threatened tariffs on the European Union (EU), increasing the prospect of an international trade war.
Trump’s planned 25% tariffs all Canadian and Mexican imports to the US are set to take effect on Tuesday. A lower rate of 10% will be levied on imports of Canadian energy to the US. Goods from China will also see a 10% tariff on goods.
Trump has argued that the US should not be running trade deficits with those countries and on the Truth Social social media platform has stated, “Make your product in the USA and there are no tariffs”.
Earlier this month, US law firm Crowell & Moring warned that Trump’s planned tariffs could “compound the complexity, duration, and significant risks and challenges associated with planning, construction, and operation of megaprojects”.
It urged owners and contractors to work to understand and plan for the impact of tariffs on large-scale projects.
Prospect of increased prices
The move could see increased prices for US industry and consumers and economists.
One product used by construction companies that is likely to increase in price is Canadian lumber. The US Department of Commerce already raised tariffs on imports of Canadian softwood lumber products from the rate of 8.0% to 14.54% in August 2024, under President Joe Biden.
The increase was part of a series of administrative reviews by the Department of Commerce as part of its softwood lumber “anti-dumping and countervailing duty orders”. US-based housebuilding organisations, including the National Association of Home Builders (NAHB) have previously expressed their opposition to increased tariffs on Canadian lumber, arguing that they make housing less affordable.
Meanwhile, Chinese manufacturers of construction equipment are likely to find it harder to sell their products into the US market. US-based manufacturers that have shifted their production facilities to Mexico could also see their products affected, although those that have retained manufacturing capabilities in the US are expected to rely more heavily on their home facilities while focusing factories outside of US borders on international markets.
Nonetheless, prices of raw materials and parts involved in the production of those machines could also rise.
Revived tariffs on aluminium and steel are expected to affect millions of tons of imported metal. Canada, Mexico and Brazil were the US’s top three sources of imported steel in 2023, according the data from the US Commerce Department. Net imports accounted for 13% of the 93 million tons of steel that the US consumed that year. Canada reportedly accounted for more than half of aluminium imports to the US in 2023.
Even if US-based companies can increase production and reduce reliance on imports, that process is likely to take years, raising the prospect of price increases for US companies and consumers in the short term.
As the tariffs were due to be introduced on Tuesday, stocks slid across the world as markets assessed the impact of the moves on international trade. There were also fears that Canada, which as a particularly close trading relationship with the US, could fall into recession as a result of the tariffs.
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