The Canadian Manufacturers and Exporters is putting a spotlight on illicit trade and making several recommendations to the federal government to address the issue.
The CME wants the government treat illicit trade not only as a policing issue but also as a strategic economic and trade concern affecting manufacturing competitiveness and Canada’s credibility.
The message comes as a result of a CME report titled Pressing Matters: Combatting Illicit Trade and Manufacturing Equipment Misuse in Canada which examined the growth of contraband tobacco, illegal nicotine products, cargo theft, cannabis, auto theft, and other illicit markets, including how organized crime is using advanced manufacturing equipment and online platforms to scale operations, especially on major borders like Vancouver, Montreal, and Windsor.
The report says major gateways like Windsor are important hubs for legitimate commerce but continue to attract sophisticated smuggling activity that leverages gaps in inspection and monitoring, high cargo volumes, and operational challenges for border authorities.
CME Chief Economist Alan Arcand, who authored the report, says illicit trade drains public revenues, funds organized crime, undercuts legitimate businesses, and weakens confidence in Canada as a secure and reliable trading partner.
The CME report recommendations include:
- Expanding border enforcement beyond fentanyl and migration to include broader illicit trade markets;
- Creating a National Tobacco and Nicotine Intelligence Centre;
- Strengthening Canada-U.S. intelligence sharing and joint enforcement;
- Improving tracking of high-risk manufacturing equipment and supply chains;
- Increasing enforcement against online illicit sellers and counterfeit marketplaces.
Arcand says battling illicit trade would be a lot more effective if Canada worked closer with U.S. agencies and forming joint task forces.
“Our relationship with the U.S. is a little challenged right now; that’s an understatement. There are certain areas where it does make sense to deepen cooperation with the U.S., and this would be one of those,” he says.
Arcand says you’re not going to catch 100 per cent of illicit trade that takes place, but it’s about being smarter in the way they combat it.
“Just using the latest technology at the border to tackle it. When we look at all areas of the Canadian economy, what we do find, which is interesting, is that we do tend in Canada to lag in adopting technology; that’s true in manufacturing, the industry we cover. It’s also true at the border; the U.S. is using more sophisticated technology,” he says.
The report found that:
-Contraband tobacco accounts for up to half of cigarette sales in some provinces and costs governments at least $2.5 billion annually in lost tax revenue.
-The RCMP estimates there are more than 50 illegal cigarette factories and 300+ illegal “smoke shacks” operating in Ontario and Quebec.
- Cargo theft losses across Canada and the U.S. reached an estimated $725 million in 2025, with Ontario accounting for roughly 85% of incidents.
- The illicit cannabis market still represents roughly 30 per cent of national cannabis sales.