Understanding the Impact of Trade Wars on Government Procurement in North America

Introduction

Government procurement in North America operates within a global context. Trade wars, or prolonged disputes between countries that lead to tariffs and trade barriers, can cause sudden changes in how governments purchase goods and services. Vendors must understand how trade wars affect procurement rules, costs, and eligibility. This article explains key concepts and offers practical advice for suppliers and contractors navigating these challenges.

What Are Trade Wars?

Trade wars happen when countries or economic blocs introduce tariffs or restrictions on goods and services from each other, often in retaliation to perceived unfair trade practices. Examples include the U.S.-China tariff escalation and changes under the Canada-United States-Mexico Agreement (CUSMA). Trade wars may impact supply chains, prices, sourcing, and compliance obligations for all levels of government procurement.

How Trade Wars Affect Government Procurement

Procurement authorities in the United States, Canada, and Mexico are subject to rules established by domestic laws and international trade agreements. When trade disputes escalate, several procurement-related areas are often affected:

• Tariff Increases: Higher import duties on materials or finished goods can raise costs for vendors, making bids less competitive or requiring price adjustments.
• Supply Chain Disruptions: Key components or raw materials may become scarce, leading to delivery delays or changes in qualified suppliers.
• Changes in Sourcing Rules: Procurement policies may be revised to favor domestic products, such as Buy American provisions or Canadian content requirements.
• Contract Risk and Uncertainty: Shifting regulations can put stress on ongoing contracts, potentially requiring renegotiation or affecting compliance obligations.

These effects are often unpredictable and may differ between federal, state, provincial, and municipal agencies.

Practical Steps for Vendors During Trade Disputes

• Monitor Trade Policy Changes. Stay up to date on tariffs and regional content requirements relevant to your business. Regularly review updates from procurement authorities, industry groups, and trade-focused news sources.
• Assess Your Supply Chain. Identify which of your inputs or products could be affected by new restrictions. Consider alternatives or secondary suppliers where possible.
• Review Bid Documentation Carefully. If a solicitation refers to trade compliance, tariffs, or content rules, ensure you understand what is required before submitting a response. Consult the Vendor Readiness Checklist for detailed guidance.
• Clarify with the Contracting Authority. If requirements are unclear due to recent trade policy developments, communicate and seek written clarifications before bidding.
• Document Your Cost Structure. If tariffs or other trade barriers increase costs, provide transparent pricing documentation with your bid.

Checklist: Preparing for Procurement Uncertainty

1. Confirm you are registered with necessary procurement platforms, such as PCANA Registration.
2. Map your major supply sources and assess which are most at risk in a trade dispute.
3. Review current contracts for force majeure, price adjustment, or termination clauses related to trade disruptions.
4. Update your bid preparation processes to reflect current tariff rates and sourcing requirements.
5. Consult compliance guides, such as the Bid Security Guide, for changing documentation requirements.
6. Retain records of all correspondence and compliance actions in the event of post-award audits.

Examples: Recent Trade War Impacts

Several real-world cases illustrate how trade disputes affect procurement:

• Steel and Aluminum Tariffs (2018–2019): U.S. tariffs on steel and aluminum imported from Canada and Mexico led to increased costs for public construction projects in both countries. Some suppliers struggled to meet price commitments, and agencies had to reconsider contract awards or seek local substitutes.
• Buy America Adjustments: Several municipal transit procurements in the United States adjusted their vehicle sourcing requirements to comply with revised Buy America language, impacting eligibility for Canadian and Mexican manufacturers.
• Revised CUSMA Procurement Protections: The new agreement changed protections for Canadian and American vendors bidding on public contracts, requiring companies to reassess their cross-border strategies.

These changes often occurred with minimal lead time, underscoring the need for ongoing monitoring and readiness.

Common Mistakes to Avoid

• Assuming Status Quo. Do not rely on past experience to predict future procurement requirements. Trade disputes can rapidly alter previously stable supply chains.
• Ignoring Bid Instructions. Failure to adjust proposals for new tariffs or eligibility rules can lead to disqualification or costly noncompliance.
• Poor Documentation. Lack of evidence about cost increases or sourcing changes undermines your ability to negotiate or defend your position if challenged.
• Delaying Registration Updates. Not maintaining active supplier registrations, such as with PCANA, can prevent you from receiving critical procurement notices during trade disruptions.

Conclusion and Next Steps

Trade wars can reshape the government procurement landscape quickly and unpredictably. Vendors working with public-sector buyers in North America must stay alert to policy shifts and proactively adapt their supply chains, bids, and compliance practices. Take the time to review your registration status, update your readiness procedures, and use available checklists to protect your business interests.

For up-to-date guidance, resources, and to maximize your eligibility, register with PCANA today.