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7 Minute Read | 3 Minute Skim

Tariffs versus technology: Imposed levies signal a greater need to digitize

Survey reveals gaps in technology, countermeasures and how Canada’s construction businesses stay positive

In early 2018, the United States imposed tariffs on imported steel and aluminum from a long list of countries. Canada was exempted in the first round, but by the end of May, Canada found herself included, with a 25% tariff on steel and 10% on aluminum.

A month later, on July 1, Canada countered with metal levies of her own on American producers, accompanied by a very long list of other goods, from coffee and toilet paper to gherkins, hair lacquers and insecticides.

No sector was spared in the crossfire, but perhaps none more so than the construction industry. To learn how businesses are reacting and coping in light of these changes, TSheets commissioned a survey of 500 respondents in the construction industry across 111 cities in Canada.* This is what they had to say.

TSheets 2018 tariffs and construction survey respondent breakdown

Tariffs are like losing your No. 1 customer

Canada exports some 90% of its steel and aluminum to the U.S., making the tariffs akin to losing one’s biggest customer. Perhaps a lesser known fact is how Canada’s steel mills only have the capacity to supply half of the demand for construction steel, with the rest coming from the U.S. and around the world. Furthermore, the exorbitant cost of overland transportation from domestic steel mills, which are primarily located in Ontario and Quebec, means it’s cheaper (and nearer) to import and source internationally.

When asked about the overall repercussion of the tariffs, there is definitely concern in the air.

Are you concerned about the tariffs?

Bracing for the uncertainty of what’s next

TSheets asked respondents in supervisory and ownership roles about specific tariff-related concerns like its effects on the availability of jobs and materials, the ability to complete jobs on time and sustainable profit margins in the next 12 months. And most of the responses leaned toward the negative and neutral effects, suggesting they are either bracing themselves for the worst or uncertain of what the future will bring. But close to 45% say that while tariffs will make things more difficult, they will learn to manage with what they have. From the employees’ perspective, they’re expecting tariffs to have a negative impact in all ways except their ability to complete projects safely.

What kind of impact do you anticipate from the tariffs?

Jen Skanes is the Vice President of Skanes General Contracting, an Ottawa-based residential renovations company she runs with her husband. They specialize in bathrooms, kitchens, basements and decks, from flooring to interior trim wood. While they do not source steel or aluminum directly, they know the downstream impact of the tariffs is inevitable.

“Chances are we’re using something that requires steel or aluminum as a raw material or component. So the price hike is just a matter of when and how much,” Jen concludes.

The workarounds where no one wins

Business owners impacted by the tariffs predict the need to counter the financial repercussions from the tariffs, from utilizing cheaper materials and hiring seasonal instead of full-time staffs to loading workers with more responsibilities and trying to complete for more work in less time. Business is never easy, even in the best of times. It would seem the tariffs are pushing businesses toward solutions they wouldn’t have considered otherwise. In the same vein, employees anticipate having to work more with domestic suppliers (22%), using cheaper materials (21%) and needing to complete more work in less time (14%) as the top three changes coming their way.

Time is money, yet both are wasted

TSheets previously found that business owners are embracing technology to secure their futures and working hard to pass the benefits on to their clients. Data from the construction survey, however, reflects businesses with mismatched pain points and perceived solutions.

Even though accurate labour data is crucial in processing payroll and producing spot-on job estimates, 27% of those in supervisory or ownership roles say they struggle to keep accurate labour and material records, while 32% battle with accurate job estimates.

The source of the struggle becomes clear as it was previously revealed that 14% of employees rely on their manager to track their hours for them, and more than half of employees are still using physical time cards or pen and paper to record clock-in and clock-out times. This creates unnecessary work and, ultimately, increases the likelihood of human error.

The first sign of truce: USMCA, a new trade agreement

At the time of publication, the U.S., Canada and Mexico signed a new pact known as USMCA at the G20 summit in Argentina. Expected to account for more than $1.6 trillion in trade, the trilateral free trade agreement will replace the North American Free Trade Agreement (NAFTA). More importantly, with regards to Canada, it will protect her from the threats of U.S. tariffs on auto imports, which experts say will devastate the industry.

The new agreement includes a special clause that provides Canada with a 60-day consultation period on any new tariffs, but it is not applicable to existing tariffs. Therefore, the steel and aluminum tariffs remain. Prime Minister Justin Trudeau has said removing the levies is still a priority.

Moving forward with technology and putting the pedal to the metal

Perhaps the need for digitization in an industry that has been historically slow to adopt is now greater than ever, to establish a competitive edge that will conquer come-what-may. Inefficiency is a concern no business should suffer when technology is so readily available to help streamline everyday operations like scheduling, job costing, time tracking and payroll.

And despite the levies and trade uncertainty, consumer spending and business sentiment remain high, according to the latest RBC Economic Outlook Report, with the last hurrah expected before the year wraps.

Statistics Canada reported the utilization rate in the construction industry exceeded 92% in the first quarter of 2018, the highest since 1992, suggesting it is still enjoying a boom. The sector as a whole is expected to reach its projected 4% growth for the year.

In terms of career outlook, 36% of all respondents say hiring has either not been impacted or they have not seen it affected. In fact, 19% of those in supervisory or ownership roles continue to hire as planned, while 17% say jobs are secure, though promotions and pay increases may be put on hold.

Whatever the future holds, construction will continue to forge its way through it all. “The path will never be completely smooth sailing. But construction is made up of hardy folks. We’ll make it work like we always have,” says Skanes, epitomizing the industry’s mettle and nerves of steel.

*Methodology: TSheets commissioned Pollfish to survey 500 anonymous respondents (age 18+), throughout Canada, in the construction industry, to learn about the impact from recent tariffs. TSheets designed and paid for the survey and welcomes the re-use of this data under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original source is cited with attribution to “TSheets.”

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