For anyone hoping 2026 would finally bring a little peace and quiet to Canada-U.S. relations, that optimism may have been premature. Between the fireworks at Davos, the skirmish over Greenland, Canada’s new trade deal with China, and the looming review of the Canada-United States-Mexico Agreement (CUSMA), 2026 has already given us plenty to unpack. Moreover, a long‑awaited U.S. Supreme Court ruling on tariffs has sparked a flurry of new activity. While 2025 brought uncertainty and transition, 2026 is emerging as a decisive year – one that may fundamentally reshape the future trajectory of Canada-U.S. relations.
Amid all the drama and political theater, it’s worth pausing to take stock of where the trade relationship between the two countries stands. This article will explain where Canadian tariffs are at in early 2026, and give contractors an idea of what to expect moving forward.
The Current State of Canada – U.S. Tariffs
The trade war between Canada and the U.S. began almost immediately after President Trump took office in January 2025. What followed was a series of tariff announcements, pauses and reversals, until by late April both countries had imposed substantial levies on one another. As the year unfolded, some of these tariffs were scaled back while new ones were introduced, creating a constantly shifting trade landscape.
On February 20, 2026, the U.S. Supreme Court struck down many of President Trump’s global tariffs that were imposed under the International Emergency Economic Powers Act (IEEPA), including a blanket 35% tariff on non-CUSMA compliant Canadian goods and a 10% tariff on non-CUSMA compliant Canadian potash and energy products. These IEEPA‑based tariffs, applied to dozens of countries, had been in effect since April 2, 2025. After months of deliberation, the Court ruled that the tariffs exceeded the president’s lawful authority and that emergency powers were improperly invoked to justify them.
Following the ruling, Trump quickly announced plans to enact a new 10% global tariff under Section 122 of the Trade Act—an amount he increased to 15% the next day. He also signaled his intent to use other legal tools—such as the Tariff Act and the Trade Expansion Act—to further regulate trade, a process that may take longer but could ultimately result in higher levy rates. The new 15% tariff is limited to a maximum duration of 150 days unless Congress approves an extension. Trump also announced new investigations into foreign trade practices under Section 301 of the Trade Act.
Deltek will continue to monitor these developments and report on their implications for the Canadian market.
However, the majority of U.S. tariffs affecting Canada were enacted under different legal mechanisms and continue to apply. Here are the current (as of February 2026) tariffs affecting Canadian exports into the U.S.:
- 15% tariff on all imports that don’t comply with CUSMA (effective February 20, 2026).
- 25% tariff on all cars and trucks not built in the U.S. (effective April 2, 2025).
- 50% tariff on aluminum and steel (effective June 4, 2025).
- 50% tariff on copper (effective August 1, 2025).
- Elimination of the U.S. de minimis treatment for low-value shipments. Goods valued at $800 or less are now subject to all applicable duties (effective August 29, 2025).
- 35% tariff on softwood lumber (effective October 14, 2025).
- 25% tariff on upholstered wooden products and kitchen/bathroom cabinets and vanities (effective October 14, 2025).
Additional goods – such as semiconductors, heavy trucks, pharmaceuticals and films – are under consideration for new tariffs, though no details on timing or rates have been released.
Beyond tariffs, other mechanisms have also been leveraged to restrict Canadian business activity in the U.S. President Trump recently announced his intention for the Federal Aviation Administration (FAA) to de-certify Canadian aircraft, including jets produced by Bombardier, from operating in the U.S., citing Canada’s refusal to certify several Gulfstream jets for sale in its market. This kind of tit-for-tat policymaking has become increasingly common over the past year.
Here are the current tariffs affecting U.S. exports into Canada:
- 25% tariff on all U.S. vehicles that don’t meet CUSMA requirements (effective April 9, 2025). This does not apply to auto parts.
- 25% tariff on selected steel and aluminum products, covering $12.6 billion in steel and $3 billion in aluminum (effective March 13, 2025).
Effective September 2025, Canada lifted its 25% tariffs on $44.2 billion worth of U.S. goods that had been in place since March.
The Overall Impact of Tariffs
The trade war between Canada and the United States has affected businesses and consumers on both sides of the border, though the impact has been disproportionately felt in Canada. The U.S. remains Canada’s largest export market, but its share of Canadian exports fell to 68% in November 2025, down from 76% a year earlier. This decline is largely driven by Trump’s tariffs on steel, automotive products, aluminum and lumber, which have hit these critical Canadian sectors especially hard. In November, Canadian exports of motor vehicles and parts dropped by 11.6%, reaching their lowest level in three years. Exporters in these hard-hit sectors are being pushed to seek out new markets, reflecting a broader shift toward trade diversification across both Canada’s public and private sectors.
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The Role of Free Trade
The saving grace is all of this is CUSMA. Prior to the U.S. Supreme Court’s decision, goods that met CUSMA’s rules-of-origin requirements were exempt from the United States’ blanket 35% tariff on Canadian imports, allowing an estimated 90% of Canadian goods to enter the U.S. duty-free. CUSMA‑compliant goods will remain exempt under the new 15% global tariff, making CUSMA an essential pillar in preserving a duty‑free trading environment. However, compliance comes with extensive and detailed documentation requirements, and many businesses may need legal or advisory support to ensure they meet the necessary standards.
A formal review of CUSMA begins on July 1, 2026. Although that process is still ahead, both Canada and the United States have already completed their public consultations, with businesses on both sides of the border strongly advocating for renewal. Under the agreement, Canada, Mexico and the U.S. must each indicate – on or before July 1 – whether they intend to renew, renegotiate or withdraw.
Several factors will shape the upcoming review process, and all parties – particularly the United States – are expected to arrive with firm demands. The worst-case outcome would be the elimination or non-renewal of CUSMA, which would significantly disrupt the deeply integrated Canada-U.S. economy. It would also likely pose challenges for U.S. contractors seeking to bid on Canadian contracts.
The Buy Canadian Movement
In response to U.S. tariffs, Canadian governments have taken various measures to support Canadian suppliers and be less reliant on U.S. business. Most notably, the Government of Canada is in the process of implementing its new Buy Canadian Policy, which encompasses a set of new procurement rules that prioritize Canadian suppliers and Canadian-made goods and services. Although some details are still being ironed out, the policy will reward contractors for their Canadian content, materials and employees. Contractors will not necessarily need to be Canadian in terms of their ownership but rather invest in Canada.
Another key element of the policy is its emphasis on reciprocal procurement. Suppliers based in countries that provide Canada with comparable market access will be eligible to competitively bid on federal contracts. As a result, a successful renewal or renegotiation of CUSMA – or the establishment of a new, mutually satisfactory free trade agreement – would ensure that Canada’s public-sector market remains open to U.S. contractors.
The Outlook Ahead for Canadian Contracting
At this stage, amid escalating tit-for-tat measures and political rhetoric on both sides, the situation remains highly unpredictable. Beyond the new 15% global tariff, any additional levies or trade restrictions would further complicate an already volatile situation. U.S.-based contractors should prepare for a range of scenarios as they plan their business development pipelines, including full, partial or limited access to Canada’s public-sector market during the remainder of President Trump’s term. Where feasible, companies should also explore potential investment opportunities in Canada, such as establishing or expanding operations or acquiring or partnering with a Canadian firm. Likewise, if U.S. governments were to respond to ‘Buy Canadian’ policies by restricting Canadian suppliers from their own contracts, additional implications would likely follow.
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