Tariff uncertainty posing a challenge for Ontario municipalities

The ongoing Canada-U.S. trade war is forcing Ontario municipalities to "be incredibly nimble" when planning infrastructure projects, Thunder Bay's city manager said.

While the tariffs associated with the trade war are leading to increased costs for Canadian companies, the uncertainty about when — or if — tariffs will be imposed or removed, is posing a major challenge for cities like Thunder Bay, City Manager John Collin said.

"We just don't know what's going to happen next, and that uncertainty dramatically affects, I would suggest, all cities," he said.

One example is the demolition project of Victoriaville Centre in Thunder Bay's south end. 

The demolition of the mall was initially expected to begin in April. However, in March, the city said it had extended the tender period until April 10, meaning it wouldn't begin before May.  

Part of the delay came as a result of the complicated nature of the project, city engineering manager Aaron Ward said at the time, because the project also involves renovations and road construction in the contract. 

But the trade war also played a role in the delay, Ward said, with tenders needing to be reworded to accommodate potential on-again, off-again tariffs, especially since the entire Victoriaville project won't be completed until fall 2026.

Ward said procurement also needs to change. "We need to give some sort of comfort to the contractors," he said, "because otherwise all the contractors will do is they will escalate their prices to establish a contingency to protect themselves to a degree." 

The city might also have to put off future projects including capital projects.

In a statement to CBC News, Allen Hensel, the city's manager of supply management, said the "ever-changing tariff threats, changing implementation dates, changing lists of products to be included or omitted, along with changing tariff percentages to be charged" are leaving the city in a "position of heightened risk."

Hensel stated that simply asking contractors to pay a fixed lump sum up-front, which would cover potential tariff costs associated with a project isn't the answer, as that would result in contractors either increasing their bid prices, or not bidding at all.

"The City also recognizes that shifting all risk to the contractor could result in additional costs being built into their bid price that may never actually materialize, thereby leaving the City paying more than otherwise necessary," the statement reads.

Harold Lindstrom, manager of the Thunder Bay construction association, said allowances for potential tariffs need to be made when tenders are issued.

"What I would recommend to any owner that's purchasing construction services is to allow rules to adjust the the costs after, according to duties, and make allowances in there when they award a contract," he said.