This article examines potential effects of the Trump Administration’s tariffs on cross-border trade and supply chains, while also reflecting on any implications for government contractors selling into the Canadian market. This is part of a series of analyses we’ll provide on the Trump Administration’s new policies and their anticipated impacts in 2025.

Following weeks of speculation, on February 1, U.S. President Donald Trump signed an executive order imposing tariffs of 25% on imported goods and 10% on energy exports from Canada, citing border security and a trade deficit. In response, Canadian Prime Minister Justin Trudeau announced retaliatory 25% percent tariffs on $155 billion-worth of American imports—from Florida orange juice to Kentucky bourbon to Pennsylvania motorcycles. Some Canadian premiers further reacted by announcing they would cancel their contracts with American companies and instructed their governments to “buy Canadian.” Tariffs were set to take effect on February 4, but on the eve of that deadline, Trump and Trudeau reached an agreement to delay the levies for 30 days—until March 4—while Canada takes action to bolster its side of the border. Directives from premiers on not doing business with U.S. companies have also been paused.

To avoid sweeping U.S. tariffs on its exports, Canada made a series of new commitments to border security, which include appointing a federal “fentanyl czar,” sending 10,000 frontline personnel to the border and allocating $200 million to establish a “Canada-U.S. Joint Strike Force.” This last initiative will focus on combatting organized crime and money laundering. Trudeau will also speed up the implementation of a previously announced $1.3-billion border security plan—designed to strengthen the border and disrupt illegal cross-border activity. Funding will go towards deploying new drones, helicopters and surveillance towers; purchasing advanced technology such as x-rays, mobile x-rays and hand-held chemical analyzers; and boosting public safety personnel and intelligence resources.

Just when Canadian lawmakers and businesses thought they had a reprieve, on February 10, Trump ordered 25% tariffs on all steel and aluminum imports, including from Canada. These tariffs are scheduled to take effect on March 12. Trump’s latest presidential action is creating an atmosphere of uncertainty, as it remains to be seen whether Canada will be exempt. The effects are already being felt; some Canadian companies say U.S. distributors are canceling purchase orders, and some Canadian businesses are shelving investment plans.

Many are wondering about the implications of the 25% levy on steel and aluminum in conjunction with the original 25% levy on all Canadian goods. Trump stated that tariffs would be cumulative, potentially subjecting certain Canadian exports to a 50% duty. Amid the uncertainty surrounding these tariffs and the prospect of future ones, Ottawa is weighing countermeasures, including dollar-for-dollar tariffs on U.S. steel and aluminum.

For more information on the impact of the Trump Administration on Canada-U.S. supply chains, read our recent analysis and check out the Trump Administration 2025: First 100 Days Resource Hub.