By / Natalie Bruckner
Canada’s construction industry entered 2026 in a state of cautious resilience. Rising tariffs, elevated energy costs, and ongoing supply chain disruptions are reshaping how projects are priced, planned, and delivered. Within the mechanical insulation sector, trade tensions between Canada and the United States have become a source of uncertainty.
The United States government’s imposition of tariffs on Canadian goods, along with Canada’s countermeasures, introduced new cost pressures and procurement challenges. At the same time, heightened media coverage of price increases has amplified concerns across the industry, contributing to a broader sense of unease among contractors, developers, and suppliers.
TIAC distributor members say the current environment has made many in the industry far more cautious. While tariffs are a concern, members note that it remains difficult to determine how much of the pricing pressure can be directly attributed to trade measures versus broader inflationary trends. Since the onset of COVID-19, the cost of goods has increased across the board, creating overlapping pressures that make the specific impact of tariffs harder to isolate.
However, distributors point to energy costs as having a more direct and measurable impact on operations. Elevated fuel prices have driven up shipping and freight costs across Canada, with surcharges climbing in 2026. At the same time, ongoing supply constraints have contributed to periodic product scarcity.
TIAC members note that absorbing these transportation costs is no longer viable, forcing adjustments in pricing structures and cost pass-through strategies.
Despite the uncertainty, TIAC members are pivoting accordingly and say that business is holding steady even as some projects face delays amid uncertainty. In April, the Canadian Construction Association (CCA) released its spring Construction Quarterly Economic Insights report that reflected this, pointing to continued industry resilience.
“The data shows that the fundamentals of our sector remain strong, even as risks continue to grow,” said CCA President Rodrigue Gilbert, who added that construction professionals are adapting to rising costs, weaker population growth, and growing geopolitical uncertainty. “But with the right policy environment, our industry is ready to deliver the housing and infrastructure Canadians urgently need,” Gilbert added.
More recent indicators show mixed conditions in the construction sector. Statistics Canada reported in June that the total value of building permits issued in Canada decreased $1 billion (-7.6 per cent) to $12.5 billion in April, with both the non-residential (-10.5 per cent) and residential (-5.5 per cent) sectors contributing to the decline in construction intentions. On a constant dollar basis, permits were down 7.7 per cent month over month but up 2.7 per cent year over year. The decline was led by British Columbia and Ontario, while gains in other provinces helped offset broader weakness.
At the same time, broader industry data points to underlying resilience. CCA also reported that construction GDP declined by 0.6 per cent in the fourth quarter of 2025, marking the first contraction after six consecutive quarters of growth. The report also showed building permits rising 9.8 per cent in Q4, the strongest increase since 2021, driven largely by multi-unit residential activity across several provinces.
A closer look at construction costs shows those pressures more clearly. Statistics Canada reported in April that residential building construction costs increased 0.6 per cent in the first quarter, following a 0.5 per cent increase in the previous quarter. Non-residential costs rose 0.5 per cent over the same period. On a year-over-year basis, residential construction costs were up 2.8 per cent in the 15-CMA composite in the first quarter, while non-residential costs increased 3.6 per cent.
StatsCan said retaliatory tariffs on steel and steel-related products, along with ongoing material sourcing constraints, contributed to higher prices for metal-related inputs across the country. These pressures were reflected in cost increases in structural and metal-related components used in construction activity.
Insurance brokerage HUB International, in its 2026 Construction Outlook and Insurance Market Rate Report, also identifies material costs tied to tariffs and counter-tariffs as the single largest source of instability heading into the year. TIAC distributors say these rising input costs are also being felt in day-to-day operations, with tighter margins and increased pressure on pricing decisions.
Additional uncertainty has emerged from export licensing requirements on steel products introduced by China in January 2026, which have contributed to volatility in global supply chains.
Although many TIAC members prefer to source domestically, in line with broader Buy Canada considerations, procurement decisions are largely driven by cost and availability, resulting in significant reliance on international supply chains, including cross-border and overseas sourcing.
The outlook suggests little near-term relief from these pressures. A recent report by Cushman & Wakefield, the world’s largest commercial real estate services firm, reinforces that view. The report, Impact of Tariffs on Canadian CRE Construction Costs, estimates that “tariff measures introduced on May 21, 2026, will increase construction material costs by 9.2 per cent, with total project costs rising by an average of 0.92 per cent.”
TIAC continues to advocate on behalf of its members for building materials, including thermal insulation products, to be exempt from retaliatory tariffs, citing the sector’s role in energy efficiency and integrated North American supply chains.
When it comes to energy costs, the impact of elevated oil prices extends beyond shipping and transportation. These pressures are also flowing through petrochemical-based inputs used in construction materials, including certain insulation products, piping, and membranes.
Taken together, tariff pressures and energy volatility, whether actual or perceived, continue to reshape cost and procurement conditions across the construction sector, with TIAC members saying they are adapting as conditions continue to shift. ▪
