A condo construction site in downtown Toronto, on May 25, 2023.Chris Young/The Canadian Press
As trade war talk continues to simmer, Canada’s plan for retaliatory tariffs could have an immediate and negative impact on this country’s condominium owners, who are unusually exposed to U.S. exports of some key goods.
“Our first reaction was panic,” said Samantha Angel, CEO of Folio Interiors, which specializes in renovations and refurbishing the approximately 11,000 condominium buildings across Ontario. “We buy millions of dollars of carpet and wallpaper every year, and we don’t buy any of it in Canada.”
It’s a realization that’s playing out across the economy as businesses and regular Canadians look for homegrown or offshore alternatives to American products ever since U.S. President Donald Trump signed an executive order on Feb. 1, imposing a 25 per cent tariff on Canadian exports. Even though Mr. Trump agreed to a 30-day pause on the implementation of those tariffs just a few days later, Canadians are still scrambling to figure out whether the goods they rely on might face sudden price surges in a trade war.
The federal Ministry of Finance prepared a list of $30-billion worth of U.S. goods – from dairy to unmanned drones and plywood to jewellery – that would face retaliatory tariffs, and Minister Dominc LeBlanc has warned another $100-billion worth of goods could follow later. However, when it comes to commercial carpet and wallpaper, U.S. imports dominate the Canadian market and there are no domestic suppliers who can step in.
U.S. companies exported about $335-million worth of carpet to Canada in 2024, which accounts for less than 5 per cent of their sales, which in 2024 was between $10- to $12-billion according to the U.S. Carpet and Rug Institute – a lobby group run by the largest companies in the sector.
Still, U.S. carpet makers have been the beneficiary of free trade accounting for as much as 90 per cent of the carpet sold in this country, to the point where in the mid-1990s the Canadian industry took an anti-dumping complaint to an international trade tribunal (which ultimately ruled in favour of the U.S. industry).
“Take Interface Inc., a U.S.-based public company,” said Chris Paterson, whose company Renewed Renovations specializes in condo refurbishments. “They look at Canada as the 51st state; most [American] manufacturers do.” Sales representatives from Interface have told him that the Canadian branch of the company sold close to $90-million worth of product last year, making it a larger market for the company than any single U.S. state.
Condo renovations are a niche market, but a large one, with anywhere from 100 to 300 happening each year in Ontario, according to Mr. Paterson and Ms. Angel. The reserve studies routinely carried out by condominium building corporations put things like hallway renewals on a schedule that condos save for over time. Complicating matters, Ms. Angel said many condo clients had already been deferring renovations in recent years after COVID-19-era supply chain shortages jacked up prices. A 25 per cent price hike, under these conditions, would be more than most condos could manage, she said.
“A ballpark example of a typical corridor job in the Toronto-area would be a 20-storey building where the budget is a million dollars,” said Mr. Patterson. “Your carpet is going to be around the $250,000 mark, wall covering close to $200,000: is the condo corporation willing to absorb an extra $50,000, or $100,000?”
Other factors complicate commercial orders of carpet and wallpaper for hotels, condominiums and apartment buildings or office spaces. Such large orders necessitate that all the fabric be made at one time from the same dye-lot so the colours don’t change from one area to the next, meaning the orders can take between eight to 14 weeks to deliver. For importers waiting for their carpet to arrive, the tariffs would apply when they come over the border, not when the order was placed.
As tariffs loomed in early February, Mike Campitelli, the vice-president at Odyssey Wallcoverings, said he reached out to his U.S. suppliers of commercial wallpaper to see if he could get help from them to absorb some of the potential tariff price spikes.
“Pretty much all of them said the same thing: ‘Screw you.’ But in a more nice way,” he said. Unlike his suppliers, he’s willing to take a hit on some of his own profit margin to avoid having clients cancel an order – but not 25 per cent. “I’m just a little fish in a big sea; I import a lot, but to each one of those suppliers it may be only $500,000 to a million per year.”
Commercial carpet and wallpaper is also used in new construction, part of the small but significant collection of U.S. exports that factor in Canada’s building supply chain.
“U. S. imports into the Canadian construction industry account for about 8 per cent of costs – about $35-billion,” said Peter Norman, chief economist with real estate analysis company Altus Group. While hundreds of billions of construction inputs are produced locally, Mr. Norman said Canadian tariffs could cause disruptions for some key supplies – such as the HVAC sector where U.S. machinery accounts for about 40 per cent of the market.
Still he sees a broad U.S. tariff as a much more significant challenge for builders and homeowners than any pain from retaliatory measures.
“This recession that would come from such a scenario would be the first recession we’ve had that looks like the 1990s recession,” Mr. Norman said, with the potential for job losses being much higher than what followed the bursting of the tech bubble in the early 2000s or the fallout from the U.S. financial crisis in 2008. “We’ve had several recessions since that have widely bypassed housing, but after the 1990s, the housing sector was in the wilderness for a decade; we lost 40 per cent of the value of our housing stock.”
For Mr. Campitelli, a trade war couldn’t be coming at a worse time. “Our economy for the last six months has been on fire for us: it’s the best it’s been in 10 years – and it’s about to be all thrown in the garbage,” he said.