A recent study by the Montreal Economic Institute (MEI) indicates that the federal government's "Buy Canadian" policy could lead to a substantial increase in costs for taxpayers, potentially reaching $12 billion each year. The policy, which came into effect in December 2025, favors domestic firms in federal procurement contracts. It gives Canadian suppliers an advantage in the evaluation process for contracts worth $25 million or more, and this threshold is set to decrease to $5 million by June 15, 2026.
The "Buy Canadian" policy aims to bolster domestic industries by prioritizing Canadian suppliers and materials in government procurement. This includes strategic sectors like defense, security, health, pharmaceuticals, infrastructure, and transportation. The policy stipulates that certain materials, such as steel, aluminum, and wood, used in federal construction and defense contracts must be Canadian-produced.
Vincent Geloso, the author of the MEI study and an economics professor at George Mason University, argues that these preferential rules could hinder Canadian firms in the long run. He suggests that reduced competition might diminish the need for innovation among domestic businesses. Geloso points to examples of procurement protectionism, such as a California state program, where preferential treatment for local businesses led to increased costs. Applying similar metrics to Canada, the study estimates potential increased costs between $4.8 billion and $12.2 billion annually.
While the "Buy Canadian" policy is intended to support Canadian businesses and workers, critics like Geloso suggest it could lead to costlier projects and potentially lower-quality infrastructure. The long-term effects of the policy on Canadian competitiveness and the overall economy remain a subject of debate.
