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Archive February 2025

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Preparing your Business for Potential Tariffs: Existing and Future Contracts

Preparing your Business for Potential Tariffs: Key Considerations
 
On February 1, 2025, U.S. President Trump, issued an Executive Order (EO) imposing 25% tariffs on all “products of Canada”, excluding energy resources, which will face 10% tariffs instead. In response to the tariffs, Canada released its own retaliatory tariff package, beginning with 25% surtaxes on select U.S. goods
 
As of February 3, 2025, the tariffs proposed by the U.S. and Canada’s retaliation are now paused for 30 days. 
 
Despite the 30-day pause, there remains questions about the implications of future potential tariffs to Canada’s construction and infrastructure industry, as the costs of products essential to construction could immediately increase upon the introduction of any such tariffs.

For Existing Contracts
 
The question thus arises – will contractors and trades be able to recover these increased costs under their contracts?
 
Check whether your contract includes provisions for price adjustments due to changes in taxes and customs duties.
 
Fortunately, unlike construction cost increases caused by inflation or supply chain impacts, standard form stipulated price contracts generally include terms that expressly provide for adjustment to the contractor’s compensation when there are changes in taxes and duties. For example, paragraph 10.1.2 of the CCDC 2 – 2020 Stipulated Price Contract (“CCDC 2”) provides as follows:
 
“10.1.2 Any increase or decrease in costs to the Contractor due to changes in taxes and duties after the time of the bid closing shall increase or decrease the Contract Price accordingly.”
 
For Future Contracts: How to Address Tariff Uncertainty
 
If tariffs are implemented, the resultant rising costs and supply chain disruptions will create challenges for contractors, suppliers, owners, and developers alike. 
  • Raise the issue early: If the contract lacks duty provisions, especially if you’re aware of upcoming changes to taxes or customs duties, formally bring this to the owner’s attention.
  • Include duty provisions: Encourage the owner to include duty provisions or address this uncertainty in the bid documents. Look to GC 10.1 of CCDC 2 for standard, industry-accepted wording.
Given the potential for tariff changes during Trump’s presidency, it is recommended that contractors review their contracts (both existing and future) to determine what, if any, relief is provided to them if tariffs change. Where contracts are silent on the point, it is likely that the contractor will not be able to recover these costs. Therefore, whenever possible, it is recommended that the contractor seek to have terms added that provide for adjustment to the contractor’s compensation upon any change in tariffs after bid close, similar to paragraph 10.1.2 of the CCDC 2.
 
If you have any questions about these tariffs, please contact Krisha Ruchlewicz (905-629-0587 ext. 227 or krisha.ruchlewicz@oswca.org).

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