The United States and Canada are working to reach a trade agreement before punishing 50 percent tariffs on a range of Canadian goods take effect at 12:01 a.m. Wednesday, though the two countries offered notably different assessments of how close a deal actually is.
Industry executives and trade specialists following the talks described the two sides as inching closer to an accord that could pair Canadian tariff concessions on energy, defense and critical minerals with a U.S. agreement to shelve the new tariffs and ease existing steel and aluminum duties. Those sources spoke on condition of anonymity to discuss confidential negotiations.
Canadian officials offered a more cautious picture. Dominic LeBlanc, the Canadian minister responsible for trade with the United States, told an advisory committee Friday that the two countries remain far from a draft agreement despite frequent meetings, according to a source briefed on the discussion. The source said Canadian negotiators described the two sides as quite far from an agreement Prime Minister Mark Carney could sign off on, adding that in negotiations of this kind nothing is agreed until everything is agreed.
What We Know So Far
The threatened tariffs, imposed under a rarely used provision of a 1930 law known as Section 338, would apply to a relatively narrow slice of Canadian trade, though sources differed on the precise scope. One account put the affected goods at about 5 percent of the 382 billion dollars in Canadian goods the U.S. imported last year, while another described the tariffs as covering nearly 20 billion dollars, or about 5.2 percent of Canada’s total exports to the U.S. Unlike many of Trump’s earlier tariffs, the new duties would apply even to products that currently qualify for preferential treatment under the U.S. Mexico Canada Agreement, adding a distinct layer of risk for Canada’s economy.
LeBlanc is in Washington with his chief trade negotiator and a team of officials, and has met U.S. Trade Representative Jamieson Greer four times over three weeks as the deadline approaches. His office said he plans to remain in Washington through the weekend as talks continue, with meetings occurring daily at a technical level, according to the briefed source.
Candace Laing, CEO of the Canadian Chamber of Commerce and a member of the advisory committee LeBlanc briefed, said both sides are aiming for an interim agreement that would resolve both previously imposed U.S. tariffs and the looming 50 percent duties, with multiple meetings planned over the weekend. LeBlanc separately briefed Canada’s provincial and territorial trade ministers on the state of negotiations Friday.
Key sticking points include Canadian tariffs on U.S. autos, disagreements over how dairy quotas should be allocated, and the continued refusal of some Canadian provinces to stock U.S. alcohol on store shelves. Canada, for its part, wants the U.S. to lower its steel and aluminum tariffs, which currently stand at 25 percent under a separate national security related provision known as Section 232.
Beyond tariffs, the two countries are discussing broader cooperation on energy and defense, including potential Canadian participation in the Trump administration’s Golden Dome missile shield program and purchases of F-35 fighter aircraft. The U.S. also wants greater access to Canadian critical mineral supplies as part of a broader effort to reduce dependence on China for those materials.
Canada could secure a politically significant win on lumber exports, with existing antidumping duties potentially dropping by around 10 percentage points as part of a routine annual Commerce Department review, according to industry executives.
What Authorities and Analysts Are Saying
Trade attorney Dan Ujczo, who is following the talks from Columbus, Ohio, said he remains optimistic that a resolution, in full or in part, will stave off the new tariffs, describing both countries as wanting a deal.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Toronto, warned that the tariffs could force Canada into political retaliation if a comprehensive deal isn’t reached, potentially setting back trade relations by years.
Jake Colvin, president of the National Foreign Trade Council, said the outcome could either build confidence toward broader renegotiation of the North American trade agreement or introduce new friction that spirals quickly, depending on how the talks conclude.
Beth Burke, head of the Canadian American Business Council, said the stakes extend well beyond abstract policy, carrying real consequences for both American and Canadian livelihoods.
Why This Matters
The dispute marks a significant deterioration in what had been a historically close and largely tariff free trading relationship between the two countries. Tension has built steadily over the past year, following Canada’s decision to retaliate against earlier Trump tariffs, provincial removal of U.S. wines and spirits from government run stores, and a 25 percent Canadian tariff on some U.S. autos that disrupted an industry accustomed to shipping partially finished vehicles across North American borders during production.
Trump has separately provoked Canadian anger with repeated remarks suggesting Canada become the 51st U.S. state, comments that have made an already strained relationship more politically charged. Carney has said all retaliation options remain on the table if new U.S. tariffs proceed, while also expressing a preference for a full settlement rather than a narrow, limited agreement.
An Oxford Economics study estimated that permanently higher tariffs resulting from a collapse of the broader North American trade agreement could cost the U.S. economy 1 trillion dollars over the next decade, underscoring the economic stakes extending well beyond the specific goods targeted by the Section 338 tariffs themselves.
A successful deal could also provide momentum for the broader renegotiation of the U.S. Mexico Canada Agreement, talks that have so far proceeded with Mexico but have not yet formally begun with Canada. A breakdown, by contrast, risks not only economic damage but also further erosion of political goodwill between the two countries at a moment when formal USMCA renegotiation talks have yet to even begin with Ottawa.
What Happens Next
Negotiators from both countries are expected to continue meeting through the weekend ahead of the Wednesday deadline, with Canadian officials describing daily technical level talks even as they characterize a final agreement as still distant. Whether the two sides can bridge that gap before tariffs take effect remains uncertain given the conflicting characterizations of progress offered by industry sources following the talks and Canadian officials briefing their own advisory committee.
If a deal is reached, it could set the stage for formal renegotiation of the North American trade agreement to begin with Canada, mirroring talks already underway with Mexico. If talks collapse and the tariffs take effect as scheduled, both sides have signaled the potential for further retaliation, raising the risk of a prolonged trade dispute between the two countries.
Reporting drawn from The Washington Post and Reuters
