The US-Canada Trade War Is Rewriting Sourcing Strategies

The US-Canada trade relationship didn't need much protecting. For nearly three decades, materials crossed the border duty-free under USMCA, and most procurement teams built their plans around the assumption that this particular corridor would keep working the way it always had.

That assumption broke down fast. Trade talks between Washington and Ottawa collapsed in late August, and within days both governments moved to tariffs instead of a deal. The US imposed 50% duties on roughly $20 billion of Canadian goods, Supply Chain Dive reported, and Canada retaliated with tariffs as high as 50% on US steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

More is coming. President Trump has said tariffs on Canadian cars, trucks, auto parts, and steel will climb to 50% on January 1, 2027, a move he tied to a $60 billion trade deficit with Canada, as per CBS News. That's a lot riding on one relationship: more than $380 billion in goods crossed the US-Canada border last year, according to Census Bureau data cited by NBC News.

For a CPO or VP of supply chain, the immediate impact isn't abstract. Costs on named materials rose overnight, and sourcing decisions built around a stable border now need a second look.

Vulnerable Sectors: Packaging, Consumer Goods and Agricultural Supply Chains

Agriculture and forest products exporters are feeling it first. The Agriculture Transportation Coalition says cargo bound for US and Canadian ports depends on efficient cross-border routing, and new tariffs are adding delay and cost to shipments that used to move without friction.

Packaging is exposed on more fronts than most people realize. Canada supplies close to two-thirds of the primary aluminum used in the US, and domestic can makers import nearly 80% of the tin mill steel that goes into food cans, according to industry data cited by Packaging Dive. Corrugated and containerboard producers warn that disruption to their cross-border trade could destabilize recycled fiber markets on both sides too.

Some of this was already on the radar. Cascades told investors in early August it was building a tariff mitigation plan, and Ball flagged concerns about aluminum prices on the same earnings call cycle, both cited by Packaging Dive. The Aluminum Association has since pushed for more domestic and recycled aluminum production, noting that roughly 85% of US aluminum output is already secondary metal, even as it admits there's no near-term substitute for Canadian primary aluminum.

Glass shows how tariffs spread beyond the materials named on paper. The Glass Packaging Institute pointed to Commerce Department data showing the US imported 348 million glass bottles and jars from Canada in 2025, worth more than $86 million, all previously duty-free under USMCA. Canada's countermeasures didn't name glass directly, but a year-long Canadian boycott of US alcohol, paired with new US duties on Canadian alcoholic beverages, has already dented sales on both sides of the border.

Apparel and consumer brands aren't spared either. Canada is a major source of wool apparel, ski jackets, waterproof footwear and hosiery, and the new tariffs bypass exemptions built into USMCA. Canadian counter-tariffs are raising prices for US-made goods sold north of the border too, including paper products and personal care items.

None of this stays contained to the sectors named in the tariff orders. Companies sourcing raw materials or finished goods across the border should expect sustained cost pressure and inventory uncertainty, whether or not their specific product shows up on a list.

Sourcing Strategies: Dual-Sourcing, Nearshoring and Tariff Engineering

Start with visibility at the SKU level, not the category level. The current tariff orders name specific materials, including tin mill steel, pulp and paper, and primary aluminum, so category-level assumptions will miss the real cost drivers.

Dual-sourcing cuts dependency on a single country. Shifting volume toward domestic producers, Mexico, or trade partners outside the current dispute can cushion cost swings while the US-Canada relationship stays unresolved.

Nearshoring takes longer, but it pays off if this dispute drags on. Moving production closer to end markets, even partially, reduces how much of a bill of materials is exposed to any single country's trade policy.

Tariff engineering can lower duty exposure without abandoning existing supplier relationships. HS code reviews, first-sale valuation, and bonded warehousing are all worth revisiting now, before volumes shift under pressure.

Explore GEP’s - AI-Native Supplier Management Software

Redesigning Cross-Border Networks with GEP Supply Chain Consulting

The January 1, 2027 deadline for 50% tariffs on autos, auto parts, and steel gives manufacturers a defined window to requalify alternate sources or renegotiate supplier terms before the higher rate hits.

This isn't limited to companies with direct exposure to Canada. Automakers and industrial manufacturers are already announcing reshoring investments despite tariff uncertainty, a sign that network redesign is becoming standard practice well beyond this one dispute, per Supply Chain Dive's recent reporting on OEM investment plans.

GEP's Supply Chain Consulting practice helps procurement and risk teams with exactly this kind of redesign: mapping tariff exposure across the network, modeling landed cost under different trade scenarios, and rebuilding sourcing footprints so one border dispute doesn't stall the whole operation.

The Role of Multi-Tier Supplier Visibility in Proactive Risk Management

Direct supplier data only tells half the story. Aluminum, tin mill steel, and pulp are often sourced two or three tiers upstream, and companies without visibility there get blindsided by cost pass-through they can't trace back to its origin.

Proactive risk management means mapping those upstream tiers before a tariff hits, not after. Knowing which sub-tier suppliers depend on Canadian inputs, and which of those inputs sit on a tariff list, turns a reactive scramble into a manageable adjustment.

This kind of mapping also surfaces concentration risk a standard scorecard misses, where two unrelated categories quietly depend on the same upstream mill or smelter.

Building a Tariff-Resilient Supply Chain for the Long Term

Trade disputes like this one are rarely resolved cleanly. Even if talks between Washington and Ottawa resume, tariff rates have shifted twice in a matter of weeks, and there's little reason to expect the current terms to be final.

Companies that treat this moment as a one-time fire drill will be back here again. The ones that build dual-sourcing, tariff engineering, and multi-tier visibility into how they normally operate will have far more room to adjust when the next round of tariffs lands, regardless of which border it touches.