Restoration firms brace for potential tariff-driven cost impacts

Tariffs imposed on construction materials sourced from the U.S. are raising concerns within Canada’s property restoration industry.

Restoration professionals are currently navigating the effects of tariffs on reconstruction costs, though the full impact has yet to been felt, according to Jim Mandeville, senior vice president of large loss for First Onsite Property Restoration. 

“It just hasn’t worked itself through the supply network,” he told Canadian Underwriter last week. “Yet, what we do anticipate, assuming these tariffs remain in place medium- or long-term…is to see some increased cost in a lot of materials involved in reconstruction.” 

A major challenge in reconstruction stems from how global supply chains are structured. 

“The problem with the way manufacturing has evolved globally is that certain things are made in certain places,” Mandeville says.

For example, the majority of carpets in North America are made in Dalton, Georgia. And Mandeville only knows of one carpet manufacturer in Canada. For policyholders needing to replace their carpets, domestic materials aren’t always a practical option.

“That may cause some customers to decide that they’d like to, alternatively, source material from Europe, which is also very costly, or that they want to go with a different type of product that potentially could be sourced more locally — something like hardwood floor or tile,” he says. “It’s problematic because our supply chain is so globally integrated that you can’t just pick parts of it.”

Plus, parts are often sourced, assembled or precut in multiple countries before final manufacturing or distribution in Canada, meaning those supply chains are woven so tightly it can be difficult for the restoration industry to determine whether a product is truly local or not.

“How does one determine the tariff impact on that?” Mandeville poses. “There definitely is some risk for a lot of construction material when it comes time to putting things back together.”

Minimal impacts

Despite these concerns, some factors shield the property restoration industry from the worst impacts of tariffs.

For example, a significant portion of construction costs are tied to labour, which isn’t vulnerable to tariffs, says Mandeville. Plus, Canada produces many reconstruction materials, meaning local sourcing will remain unaffected. 

“Generally speaking, a very large portion of that construction cost is labour, which is local, and a large portion of the building materials are made in Canada — things like lumber and drywall —which should only have a moderate increase in price as long as no one’s profiteering,” Mandeville says.

“So you’re really left with a relatively small percentage of the total cost impacted by the tariffs.”

However, if tariffs persist, one major concern is the potential for inflationary pressure across the board; that would drive up the cost of labour. “That part is really unpredictable still.”

The next wave

Certainly, a lot about the the U.S.-Canada trade war remains speculative.

U.S. President Donald Trump has already imposed tariffs of 25% on steel and aluminum, up to 25% on goods from Canada and Mexico, and 25% on all imported automobiles and parts. For its part, Canada has countered with its own tariffs on goods imported from the U.S.

Trump has now said he’ll impose “reciprocal” tariffs to match the duties other countries charge on U.S. products. The details have yet to be announced as of press time but are set to take effect Wednesday.

For restoration firms, their current directive is to remain in close communication with suppliers to understand tariff-related cost shifts and supply risks.

“Like all businesses and concerned Canadians, we’re monitoring the situation very closely,” Mandeville says.