The media is abuzz with news about impending American tariffs and Canada’s likely response with counter tariffs. In anticipation, the consulting team at FirstService Residential explored how tariffs could impact strata budget forecasts.
CCI BC consolidated the team’s information and concluded that, while tariffs will have a minimal impact short term on operational costs in the next year, strata corporations will see general costs increase later this year and starting next year.
Likely impacts on this year’s budget
- The Bank of Canada released an article at the end of January explaining tariffs and their potential effect on Canada. https://www.bankofcanada.ca/publications/mpr/mpr-2025-01-29/in-focus-1/ The article anticipates an initial lag on price increases while businesses absorb cost increases from counter tariffs, and states that there will likely be a surplus of energy supply such as electricity and natural gas.
- Some in the BC development industry as well as appraisal companies see construction costs only growing moderately in 2025 before increasing at a faster pace as we move into 2026.
- Many trades and vendors who service strata corporations said they would honor existing maintenance contracts but would be reviewing costs once more clarity on the impact of tariffs becomes evident.
Likely impacts on next year’s budget
Should tariffs remain in place longer than a year, the impact will almost certainly be negative on several fronts with the likelihood of a lower GDP, job losses (Premier David Eby estimates the loss of as many as 120,000 jobs in B.C.), and the Bank of Canada trying to stabilize the economy through interest-rate adjustments, either up or down.
In many sectors large manufacturers source their raw materials from Canada, manufacture their product in the USA, and then sell the finished goods in Canada. There are a lot of cross border transitions which will undoubtedly add costs to those goods. Strata councils will have the difficult task of dealing with unpredictable costs and the possibility of more owners unable to pay strata fees.
Note that only the first wave of counter tariffs for goods equaling up to $30 billion has been announced and that there is another $125 billion worth of goods that could see counter tariffs being levied. How the additional tariffs will impact strata corporations is an unknown right now. Look for strata corporation budget seminars and updates to this article later this year as the situation unfolds to help you plan strategically.
Capital replacements
Trades and vendors, in general, are cautious about providing firm quotes for capital projects unless the approval window with a strata corporation is short or, should approval take more than 30 days, a provision is included to adjust material costs. Obviously the most vulnerable vendors will be those that sell products impacted directly by the counter tariffs. Read further for a list of some of those categories.
Strata Councils would be prudent to add a buffer to proposed special levies for capital projects, such as elevator modernization for example, as many of the products are made in the USA.
Budget expense line-item highlights
Here’s what the consulting team foresees being impacted the most by tariffs and, if applicable, the proposed Canadian tariff number:
Cleaning and Janitorial – largely a labour-based cost, we will see moderate increases in soap (#6307.10.10), toilet paper (#4818.10.00) and vacuum cleaners (#8508.11). Note that Purex toilet paper and Scotties tissues are made in BC so, if neither is your building’s brand yet, you may want to consider switching.
Electricity – costs should not increase significantly
91% of the electricity BC Hydro sells comes from its own hydroelectric facilities. BC Hydro is not only self sufficient, but a net exporter of energy. When there is a surplus BC Hydro exports its energy to Alberta, California, Oregon, and Washington state.
Elevator repair and replacement costs – International brands such as Otis, TK, Schindler, and Kone manufacture their parts in the US and worldwide. In general, they use proprietary manufactured parts, meaning Canadian suppliers cannot produce them for the necessary servicing of elevators unless they are licensed. Canadians may be able to source parts from other factories elsewhere in the world, but longer shipping times or higher shipping costs would have to be factored in. On a positive note, Richmond Elevator, based in BC makes some of their parts, such as frames, in BC.
Gas – costs should not increase significantly
Fortis BC sources about 75% of its natural gas from BC and 25% from Alberta.
Insurance – Insurance is partially based on replacement value (largely construction cost) of a building. Appraisal companies estimate an increase in replacement value of 4-8% for the rest of the year when outliers are removed. In the longer-term, replacement value will likely return to a much faster pace of increase due to an increase in the costs of goods and materials, supply chain issues and, in general, vendors and trades passing on the costs of tariffs. Perhaps the bigger unknown regarding insurance is how the large losses due to the California wildfires will have an impact.
Overall, this year’s insurance cost increase is not expected to rise significantly industry wide, but that will almost certainly not be the case in 2026.
Mechanical Equipment – the proposed initial counter tariffs do not currently include large mechanical components that condition air, however, be prudent and look for alternatives as costs will likely increase due to steel tariffs. On a positive note, Eco-King, a maker of boilers, is a BC manufacturer with a plant in Surrey.
Repair and Maintenance – Some material costs will increase while labour should not change significantly. Look for Canadian-manufactured goods when possible.
As an example, based on the current proposed counter tariffs, these items will have a Canadian tariff added:
- Doors and window frames (#3925.20.00 & #4418.21.00),
- Floor, wall, and ceiling coverings (#3918.10.10),
- Hand tools (#8203.20.00),
- Light fixtures (#9405.11.00),
- Locks (#8301.10.00),
- Snow ploughs and snow blowers (#8430.20.00),
- Washers and dryers (#8450.11.10),
- Window coverings (#6303.12.00).
So, to summarize, if your strata corporation is part way through its fiscal year and running on budget, then you are not likely to see dramatic cost increases should tariffs be imposed. But, if you are planning a budget now, you should factor in increases as noted and especially reassess capital projects that include material likely to be affected by tariffs and counter tariffs.
Clearly the best approach for strata corporations is to anticipate and plan for the worst while proactively shifting their exposure away from tariff-impacted purchases as expediently as possible. For more guidance as the situation unfolds, look for upcoming budget seminars such as CCI BC’s “Effective Budgeting Techniques,” scheduled for May 27th.
CCI BC is part of CCI National a Canadian non-profit
FirstService was founded by Jay Hennick in Ontario and is a Canadian company
