Washington and Ottawa are engaged in urgent last-minute negotiations aimed at blocking scheduled 50% import taxes on roughly $20 billion in Canadian goods.
President Donald Trump threatened the steep tariffs on Canadian exports including cement and hockey sticks, ratcheting up pressure on both governments to reach an agreement quickly.
With less than two hours before the tariffs were set to take effect, Trump abruptly postponed them for a 72-hour period, citing progress in ongoing trade talks between the two countries.
If no deal is reached by 12:01 a.m. ET on Saturday, the 50% tariffs on the $20 billion worth of imports will automatically switch on, dealing a significant blow to bilateral trade.
The emerging accord could pair Canadian tariff concessions with commitments on energy, defense, and critical minerals in exchange for the U.S. agreeing to shelve Trump’s new Section 338 tariffs.
Under the tentative framework, tariffs on certain Canadian exports of steel and aluminum would be lowered to 25%, while duties on Canadian auto exports could be cut to 15%.
A Canadian-built vehicle with substantial U.S.-sourced content could face an effective tariff considerably below 15%, giving automakers on both sides of the border reason to watch negotiations closely.
Negotiators have also discussed expanding the amount of vehicle content that can be excluded when calculating the tariff, a provision that could meaningfully soften the impact on North American supply chains.
Trump has stated that Canada agreed to eliminate tariffs on U.S. agricultural products, yet Trade Minister Dominic LeBlanc indicated that the farming sector would receive strong safeguards, and asserted that the dairy supply management framework was not subject to negotiation.
The looming Section 338 duties target a broad array of Canadian exports including liquor, timber, paper, and sporting goods, adding further urgency to reaching a workable agreement before Saturday’s deadline.
Nova Scotia Premier Tim Houston said Prime Minister Mark Carney encouraged provincial leaders to restore U.S. alcohol products to retail shelves, where eight of Canada’s ten provinces have either limited or blocked sales of American alcoholic beverages.
Those restrictions were enacted in response to earlier tariff actions by Washington, and their removal has emerged as one of the more visible gestures of goodwill Canada could offer during talks.
Analysts believe Washington may hesitate to impose steep new tariffs so close to the November midterms, when voters are already frustrated by elevated living costs driven in part by prior rounds of trade friction.
Multiple sources say reductions in sectoral tariffs, including those on steel and aluminum, are part of the agreement, but the details of those sectoral tariffs will “make or break the deal” politically for Prime Minister Mark Carney.
If a deal is reached, it is expected to provide significant momentum for the ongoing renegotiation of USMCA, the North American trade agreement originally reached during Trump’s first term in office.
