Federal government considers contract retaliation as Trump promises tariffs

The federal government is looking at contracts as it considers measures to counter U.S. President Trump's tariff threats. Ginette Petitpas Taylor rises during question period on Thursday, Nov. 21, 2024 in Ottawa. THE CANADIAN PRESS/Adrian Wyld

The federal government is looking closely at the business it does with American companies as it considers ways to push back against U.S. President Donald Trump’s tariff threats.

In an interview with The Canadian Press, Treasury Board President Ginette Petitpas Taylor, a member of the government’s committee on Canada-U.S. relations, said the government is looking at “where contracts are provided, what contracts are where.”

“Everything is on the table,” the minister said. “We certainly hope that we’ll be able to avoid the tariffs at all costs, but if the tariffs do arrive, we are going to respond appropriately.”

When asked how many contracts the federal government holds with American companies, Petitpas Taylor said “all departments are in the process right now of looking at where are those contracts, where they located.”

“We continue to work collaboratively within all departments,” she said. “I think we are all on edge and, you know, waiting with bated breath as to what is going to happen.”

Trump is threatening to impose steep tariffs on imports from Canada and other countries.

He has said that automobile duties will come into effect around April 2. He hasn’t said which countries they would target or how high they would be.

The president also announced last week a plan to impose what he called “reciprocal tariffs” as early as April — higher U.S. duties to match the tax rates that other countries charge on U.S. imports.

Early this month, Trump paused for several weeks his stated plan to hit Canada and Mexico with 25 per cent across-the-board duties, with a lower 10 per cent levy on Canadian energy.

He also has signed executive orders to impose 25 per cent tariffs on all steel and aluminum imports into the United States, including Canadian products, starting March 12.

Ottawa’s retaliation plan was set to begin with an initial 25 per cent tariff on $30 billion in U.S. goods in early February, with tariffs on another $125 billion worth of goods to follow three weeks later. Those measures have been paused.

While Petitpas Taylor said the government is considering all options for retaliation, a spokesperson for Minister of Public Services and Procurement Jean-Yves Duclos would not say whether the government is looking at terminating contracts with U.S. companies.

“Our government is closely monitoring the trade situation in the U.S., assessing potential impacts to existing projects, and exploring the use of tariff and non-tariff countermeasures to have a balanced and strong response if needed,” said Duclos' press secretary Mathis Denis.

When asked how many government contracts are with American companies, Public Services and Procurement Canada spokesperson Michèle LaRose said the department does not collect “specific data” on all federal contracts.

The federal public accounts report shows Canada spent $20.7 billion on outsourcing in 2023-24, up from $18.5 billion in 2022-23, $17.5 billion in 2021-22 and $14.7 billion in 2020-21.

In a statement issued last month, Liberal leadership candidate Chrystia Freeland called for American companies to be barred from bidding on Canadian federal procurement contracts — other than those for defence — and for federal government agencies to stop purchasing goods from American firms.

Marcia Mills is a partner and co-founder of Fasken’s National Security Group and a member of the law firm’s government relations and political law teams. She said that before the government considers tearing up a contract with an American firm, it needs first to determine whether it can replace the supplier and how much it would cost to end the contract.

She said the government needs to consider whether an American company is directly involved in the contract or is just a point on the supply chain — and it also needs to brace for the U.S. government taking the same approach with Canadian suppliers.

“If you’re gonna cut off your supply chain, you need to figure out where you’re going to get your goods and services,” Mills said.

Mills said Canada shouldn’t expect the cancellation of government contracts to have much influence on the Trump administration.

“The Canadian government market is very small for a U.S. supplier,” she said. “A major multinational corporation out of the U.S. who has Canadian government contracts, I wouldn’t expect it to be a significant portion of their revenue.”

With files from Sarah Ritchie and Kelly Geraldine Malone.

This report by The Canadian Press was first published Feb. 17, 2025.