In response to U.S. tariffs and trade volatility, Canadian governments have taken various measures to support Canadian suppliers and be less reliant on U.S. goods and services. The most notable instance of this is the new Buy Canadian Policy, a comprehensive federal procurement strategy implemented in December 2025, aimed at ensuring government spending directly strengthens Canada’s economy. Under this policy, federal departments, agencies and Crown corporations are required to give preference to Canadian suppliers, content, and materials—particularly steel, aluminum and wood—that are produced or processed within Canada.

This approach is designed to bolster domestic industries, support well-paying Canadian jobs and make the country’s supply chains more resilient. It also introduces a system of preferential evaluation for Canadian businesses and sets rules for reciprocal market access so that foreign suppliers can participate only when their home countries provide comparable access to Canadian firms. Altogether, the policy represents a shift toward using federal procurement not just to purchase goods and services, but to intentionally invest in Canada’s industrial capacity and long-term economic strength.

SCOPE OF THE POLICY

The policy is structured around four key components that will guide how Canadian federal procurement is conducted moving forward:

• Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurements: Under this policy, priority will be given to Canadian businesses and Canadian-made content for large federal purchases in strategic economic sectors.
• Policy on Prioritizing Canadian Materials in Federal Procurements: Under this policy, large federal construction and defence purchases will be required to use Canadian-produced steel, aluminum and wood products.
• Policy on Reciprocal Procurement: Under this policy, trading partners that provide reciprocal market access will have access to Canada’s federal public sector market.
• Small and Medium Business Procurement Program: A new program is actively under development to increase federal opportunities for small and medium-sized Canadian suppliers.

For a breakdown of the policy and highlights of its four core components, be sure to download the executive briefing included with this article.

APPLICATION OF THE POLICY

The Buy Canadian Policy applies broadly across federal procurement, encompassing several key industries as well as grants and contributions. It also encourages buyers to apply the policy even in areas where it is not formally required. The policy covers all new standing offers and supply arrangements and will extend to existing ones as they come up for renewal. Where relevant, it also applies to defence procurements governed by the Industrial and Technological Benefits (ITB) Policy.

During the bid evaluation process, suppliers can earn additional points based on their operational presence and value creation within Canada. The focus is not on corporate ownership, but rather on demonstrable actions—such as incorporating Canadian content, hiring Canadian workers, delivering from within Canada, and maintaining a legal operational base in the country.

For technology companies, a range of activities performed or delivered in Canada qualify as Canadian content, also referred to as Canadian value-added (CVA). These include software development; cloud configuration, security, and operations; data analysis; AI model development; research and development; as well as training, maintenance, and lifecycle management.

Although the policy is now in effect, several details are still being finalized. A compliance framework—including documentation guidelines and required collateral—is under development. Clarification is also needed on how the policy will apply across different industries, with recognition that individual purchases may require tailored approaches. The new Small and Medium Business Procurement Program is expected to be finalized by spring 2026. To date, few specifics have been released, though potential set-asides and dedicated procurement streams are under consideration.

While the policy represents a significant shift in federal procurement practices, it is understood that not all contracts will be fulfilled exclusively through Canadian products or resources. In some cases, the most suitable or cost-effective solution may originate outside Canada. This is where the Policy on Reciprocal Procurement becomes essential. The policy is not intended to circumvent Canada’s trade agreement obligations or exclude foreign vendors. Rather, it seeks to ensure reciprocal market access for suppliers from Canada’s trading partners.

IMPLICATIONS FOR CONTRACTORS

Documentation Requirements

As the Buy Canadian Policy evolves, suppliers should expect more rigorous documentation requirements to demonstrate CVA. While a compliance framework is still under development, suppliers can take several practical steps now to minimize future administrative hurdles and position themselves for success:

• Start by mapping Canadian operations. Suppliers should document all activities already occurring in Canada—from software development and cloud operations to manufacturing, R&D, and service delivery. Creating a clear inventory will make it easier to substantiate CVA once formal reporting standards are released.
• Strengthen internal tracking systems. Because CVA is tied to where labor, delivery and innovation take place, companies may need improved mechanisms to track labor hours, delivery locations, subcontractor contributions and operational footprints. Establishing these systems early will reduce administrative burden later.
• Ensure corporate presence is well documented. Suppliers should review their corporate registrations, confirm their Canadian legal entities are up to date, and maintain clear records of Canadian offices, teams and capabilities.
• Prepare standard documentation templates. Even without finalized guidelines, suppliers can begin drafting templates for Canadian content declarations, subcontractor attestations, proof of delivery locations and R&D documentation. Having these materials ready will streamline future compliance.
• Engage the supply chain. Suppliers will need transparent, well-documented relationships with Canadian subcontractors. Gathering attestations and formalizing workshare expectations now can help validate CVA across the supply chain.
• Conduct a readiness assessment. Internal audits can help identify gaps in record-keeping areas where Canadian operations could be expanded, or processes that may need adjustment to meet future requirements.
• Monitor evolving guidance. Because documentation expectations will vary by industry, suppliers should closely follow updates to procurement guidelines and participate in consultations where possible.

Canadian Contractors

The Buy Canadian Policy marks a shift from a best-efforts approach to a clear, enforceable obligation to prioritize Canadian suppliers. This change is expected to generate new opportunities across the domestic market, particularly for small and medium-sized businesses. In the near term, Canadian contractors can position themselves more competitively by proactively documenting their CVA and maintaining flexibility within their business pipelines as the federal government refines and fully implements the policy framework.

U.S.-Based Contractors

U.S.-based contractors have long accessed Canada’s public sector procurement market through the World Trade Organization Agreement on Government Procurement (WTO GPA). This agreement ensures that U.S. suppliers can bid on contracts issued by most Canadian federal departments and Crown corporations, as well as all thirteen provinces and territories. Although the Canada-United States-Mexico Agreement (CUSMA) has been prominent in recent news, it does not govern procurement between Canada and the U.S.

Under the Policy on Reciprocal Procurement, the U.S. remains a recognized trading partner by virtue of its participation in the WTO GPA. However, a recent regulatory shift has changed how challenges to Canadian procurement policies are handled. The Canadian International Trade Tribunal (CITT)—the body responsible for reviewing foreign supplier complaints—has amended its rules to dismiss challenges related to the Buy Canadian Policy. As a result, the CITT is no longer available as a venue for foreign suppliers seeking to contest Canadian preferential procurement measures under trade law.

While the Buy Canadian Policy tightens market access for non-Canadian suppliers, U.S. companies still have several strategic pathways to remain competitive in the Canadian federal marketplace. Companies that take proactive steps—establishing a Canadian presence, forming local partnerships, sourcing Canadian inputs or aligning with reciprocal access programs—can continue to compete effectively and compliantly within Canada’s evolving procurement landscape:

• Build or Expand a Real Canadian Footprint. Establishing or growing Canadian operations—such as local investment, hiring or R&D—boosts competitiveness by increasing Canadian content scores.
• Partner with Canadian Firms. Joint ventures or consortia with Canadian suppliers help integrate domestic expertise and supply chains, aligning with Canadian content priorities and easing access where foreign participation is more limited.
• Source Materials from Canadian Producers. For projects requiring Canadian-made steel, aluminum or wood, U.S. firms can comply by sourcing these inputs from Canadian manufacturers while retaining value-added work elsewhere. Furthermore, the U.S. maintains comparable domestic sourcing requirements for steel, aluminum and wood under the Build America, Buy America (BABA) framework. As a result, companies operating in both the U.S. and Canadian markets must carefully manage the diversity of their supply chains and maintain rigorous tracking systems to ensure compliance in each country.
• Use “Trusted Partner” Exceptions. When no suitable Canadian supplier exists, the policy allows contracting with “trusted partners,” offering opportunities for U.S. firms with unique capabilities not available domestically.
• Leverage New Procurement Programs and Reciprocal Access. Canada’s upcoming Small and Medium Business Procurement Program and Policy on Reciprocal Procurement may create additional openings for foreign firms—especially those with Canadian subsidiaries—as these initiatives expand supplier participation.
• Explore Non-Federal Markets. Since the policy applies mainly to federal departments and Crown corporations, U.S. businesses may find more flexible procurement environments at the provincial or municipal level.
• Target Procurements with Fewer Local Content Requirements. Because the strictest rules apply to major projects (currently $25M+, shifting to $5M+), U.S. firms can focus on professional services, technical offerings or specialized markets where domestic content requirements are less stringent.

THE BOTTOM LINE

The Buy Canadian Policy represents more than a procurement update—it’s a deliberate push to reshape Canada’s economic future from the ground up. Domestic suppliers stand to gain the most, especially those ready to showcase their Canadian value in practical, measurable ways. U.S. firms will face stiffer competition, but those willing to invest locally, collaborate with Canadian partners and navigate reciprocal access rules can still thrive. With compliance requirements continuing to evolve, early preparation will separate the contenders from the bystanders. In the end, success will hinge on one clear question: how convincingly can a supplier prove they’re helping build Canada’s economic strength?