U.S., Canada in last-minute talks to head off steep new U.S. tariffs

U.S., Canada Hold Last-Minute Talks Ahead of Potential New Tariffs

Washington — The United States and Canada have maintained trade disputes for decades, including disagreements over Canadian softwood lumber imports and U.S. access to Canada's dairy market. The two countries have continued as allies and trading partners, with Canadian forces participating in operations in Afghanistan after 2001. The 5,525-mile border remains undefended, with nearly 330,000 people and $2 billion in goods crossing daily and 800,000 Canadians residing in the United States.

President Trump has applied tariffs on Canadian goods as part of efforts to increase domestic manufacturing and has stated support for Canada becoming the 51st U.S. state. A petition calling for the removal of U.S. Ambassador Pete Hoekstra has gathered nearly 218,000 signatures since July 21, citing the ambassador's statements on the matter. New 50% tariffs on approximately $20 billion in Canadian products, including hockey sticks and tongue depressors, are scheduled to take effect at 12:01 a.m. Wednesday unless an agreement is reached.

Canadian Prime Minister Mark Carney stated on Monday that negotiations are underway. "We are negotiating," he said in French. "The negotiations are very intense and delicate. This is not the time to talk about negotiations in public."

The Trump administration currently maintains 10% tariffs on Canadian goods, though most imports qualify for exemptions under the U.S.-Mexico-Canada Agreement negotiated during Trump's first term. Roughly 72% of Canadian exports last year went to the United States. U.S. importers pay the tariffs and may pass costs to consumers. Ryan Majerus, a partner at King & Spalding and former U.S. trade official, said both sides appear motivated to avoid implementation ahead of November midterms amid existing concerns over living costs. "I don't think either side really wants these tariffs to come into effect," Majerus said. "There's a pretty strong push on both sides to find an off ramp here."

U.S. objectives in the talks include increased Canadian purchases of American military equipment such as F-35 aircraft, participation in the proposed Golden Dome missile defense system, and greater U.S. access to critical minerals to reduce dependence on supplies from China. Canada seeks removal of U.S. tariffs on steel, aluminum, and softwood lumber, which the United States has described as subsidized.

Trump has centered tariffs in his second-term economic policy. Last year the administration imposed double-digit tariffs on nearly all countries, citing the U.S. trade deficit as a national emergency. The Supreme Court ruled in February that the measures exceeded authority, leading to refunds for importers. In July the administration applied 10% to 12.5% tariffs on 59 countries and the European Union, representing 99% of U.S. imports, for alleged failures to restrict imports produced with forced labor.

Last month the administration invoked Section 338 of the Tariff Act of 1930 to impose 50% tariffs on products accounting for about 5% of Canadian exports to the United States. Canada and China were the only countries to apply retaliatory tariffs following the prior round of U.S. measures. U.S. Trade Representative Jamieson Greer stated at the Iowa State Fair that retaliation would prompt further action. "If a country retaliates against us, we're obviously not going to tolerate that," Greer said. "We'll take action. My sense is the Canadians, they want to have a more conciliatory approach, but we'll see."

Section 338 permits tariffs up to 50% on imports from countries found to discriminate against U.S. businesses. No prior investigation is required, and no time limit applies. Trump cited Canadian restrictions on U.S. exports of autos, alcohol, and cheese as justification. The administration is also renegotiating the U.S.-Mexico-Canada Agreement, with the tariff threat providing leverage for additional concessions.

Christopher Gundermann of the Center for Strategic and International Studies noted that Canadian Prime Minister Carney requires a renegotiated agreement without an active trade conflict. Daniel Béland of McGill University said Canadian public reaction could constrain concessions. "Canada's government cannot look like it is simply caving to the Trump administration's demands," Béland said. "Making further concessions without getting something meaningful in exchange would probably lead to a strong backlash. The risk is for the Carney government to make Canada look weak and, therefore, even more vulnerable to future trade and geopolitical pressure."

Canadian Minister for U.S. Trade Dominic LeBlanc met with Greer on Monday and stated afterward that discussions continue. "The work is continuing," LeBlanc said. "We continue to do our job."

The 1930 Tariff Act, which included the Smoot-Hawley provisions, raised duties across a wide range of imports during the early Great Depression. Section 338 has not been used previously. The current application targets a limited share of bilateral trade rather than broad global increases.