Abbotsford Police Const. Ian MacDonald says the incident happened on the U.S. side of the border a few kilometres away from the Huntingdon border crossing.
He says one of the suspects was taken into custody in the U.S., while the second escaped.
MacDonald says American border officials then alerted Canadian police, saying the suspect may have made his way into Canada.
While there's no indication that the person is in Canada, MacDonald says police have set up patrols, road blocks and a helicopter is scouring the area on each side of the border.
MacDonald didn't know what set off the exchange of gunfire.