Construction and Infrastructure Law in Canada Blog

U.S.-Canada aluminum trade war: How it could affect the Canadian construction industry

Oct 1, 2020 3 MIN READ
Andrew Wong

Partner, Commercial, Toronto

Ethan McCarthy

Associate, Construction, Toronto

In recent International Trade Briefs, Osler lawyers Riyaz Dattu and Gajan Sathananthan discussed the countermeasures proposed by the Canadian government in response to the U.S. government’s 10% tariff on raw aluminum products exported from Canada and the cessation of the 10% tariff (and the corresponding cessation of the implementation of the Canadian government’s matching countermeasures). However, the U.S. government seems likely to reimpose the tariff retroactively if  monthly import volumes of certain aluminum exports from Canada exceed identified quotas.

The countermeasures originally proposed by the Canadian government took the form of a 10% surtax on imports of aluminum and aluminum-containing products from the U.S. Since our colleagues Riyaz and Gajan have concluded that there is a real risk that the U.S. government will reimpose the tariff, we will now take a look at how any countermeasures implemented by the Canadian government in response to the reimposed tariff could impact the Canadian construction industry.

What are the countermeasures?

The products that would potentially be subject to countermeasures were set out in a proposed list issued by the Canadian government and the total value of the countermeasures was expected to be in the range of $3.6 billion. This list included imports of the following:

  • aluminum wire, bars, rods, plates, sheets, strips, tubes and pipes (types of products used in the manufacture of building materials like roofing, curtain walls, shutters, fencing, gutters, panelling and siding);
  • aluminum doors, windows and frames;
  • aluminum nails, tacks, staples, screws, bolts, nuts, screw hooks, rivets, cotters, cotter-pins, washers and similar articles;
  • aluminum office furniture; and
  • aluminum structures and prefabricated aluminum buildings.

Impacts of the countermeasures

As aluminum is the second-most widely used metal in building materials after steel, any increase in the import cost of these products from the United States would likely have knock-on effects on the local cost of most, if not all, aluminum building materials in Canada. However, this could present an opportunity for Canadian manufacturers of finished aluminum products to expand their market share within the Canadian marketplace using local raw aluminium.

In all likelihood, any increased costs incurred as a result of a surtax by manufacturers would be passed on to subcontractors and contractors purchasing building materials and, ultimately, the owners and end-users of construction projects.

  • In the immediate aftermath of the implementation of any surtax, an owner operating under an existing cost plus construction contract could expect to see increases to the cost of the work (and their construction budgets).
  • Parties entering into construction contracts for new projects should consider dealing with the impact of any surtax in their contracts.

Considerable uncertainty currently exists as a result of the suspension of the U.S. government’s tariff and the potential for the Canadian government to implement a retaliatory surtax if the U.S. government reimposes the tariff retroactively in the future. So, even in this period of limbo, parties entering into new construction contracts may want to consider if, and how, their contracts should address this issue.