Key Highlights

  • Canada is making a last-ditch effort to avoid fresh 50% US tariffs on $20 billion worth of goods before a midnight Wednesday deadline
  • Prime Minister Mark Carney spoke by phone with President Trump on Monday as trade negotiations entered an intense and delicate final phase
  • The new tariffs would be imposed using a section of the Tariff Act of 1930 that has never before been used to levy duties on trading partners
  • Existing US tariffs already cover Canadian cars, steel, aluminum and forest products, with the new levies threatening further consequences for the Canadian economy

Carney and Trump Speak as Deadline Approaches

Canada is making a last-ditch bid to avert a fresh volley of US tariffs on $20 billion worth of goods, ranging from hockey sticks to liquor, as relations between the two countries come under renewed strain. Prime Minister Mark Carney spoke by phone with President Trump on Monday ahead of a deadline set for just after midnight Wednesday, in an effort to stop or reduce the threatened 50% tariffs on a range of Canadian exports.

Carney described the negotiations as very intense and delicate, speaking to reporters in Canada's Newfoundland and Labrador province. The new tariffs come as Carney has worked to manage relations with Trump, who has repeatedly floated the idea of Canada becoming the 51st US state and has plunged the two countries into an on-and-off trade war. Trump reignited the dispute with the threat of new levies last month, a day after the two leaders met at the World Cup final.

Existing Tariffs Already Cover Key Canadian Exports

US levies are already in place on Canadian cars, steel, aluminum and forest products, but the new tariffs threaten sweeping additional consequences for Canada's economy. An industry group representing independent Canadian businesses said roughly 85% of Canadian exports have remained tariff-free so far, warning that the threat to impose 50% tariffs on a wide range of new products would be a defining moment for thousands of smaller Canadian exporters.

Canada's trade minister and chief negotiator met with the US trade representative and commerce secretary in Washington on Monday as talks continued. Carney said Ottawa has developed a plan that will cover all eventualities. If no agreement is reached by the deadline, the US is expected to implement the new levies under a section of the Tariff Act of 1930 that has never previously been used to impose duties on trading partners, after the US Supreme Court earlier this year invalidated the emergency powers Trump had used for many of his broader trade actions.

Dairy Policy and Alcohol Bans Remain Key Sticking Points

The US administration has complained about what it describes as discriminatory and unequal treatment of American commerce, pointing to protectionist policies in Canada's dairy industry and government procurement. The US has also demanded that Canadian provinces scrap bans on American alcohol that were introduced last year in response to earlier US tariffs. The US trade representative said any resolution would need to address all of these issues or include a pathway toward doing so, describing recent talks with Ottawa as constructive while adding that the US would not tolerate retaliation.

The trade clash comes after the US administration opted in July against a long-term renewal of its existing trade agreement with Canada and Mexico, instead committing to a series of rolling talks. A spokesperson for Canada's minister responsible for US trade declined to comment on the state of the negotiations.