US, Canada hold last-minute talks to stop 50% U.S. tariffs on $20 billion worth of Canadian goods

US, Canada Hold Talks to Address Proposed 50% Tariffs on $20 Billion in Canadian Goods

The United States and Canada have maintained a long-standing trade relationship marked by periodic disputes over items such as Canadian softwood lumber and U.S. access to Canada’s dairy market. The two countries have also sustained close security and economic ties, including Canadian military participation alongside U.S. forces in Afghanistan after 2001. The 5,525-mile border remains undefended, with roughly 330,000 people and $2 billion in goods crossing daily and approximately 800,000 Canadians residing in the United States.

President Donald Trump has applied tariffs on Canadian goods as part of efforts to increase domestic manufacturing and has made statements proposing that Canada become the 51st U.S. state. A petition calling for the removal of U.S. Ambassador Pete Hoekstra, a Trump appointee, has gathered nearly 218,000 signatures since July 21. The petition cites the ambassador’s statements regarding potential U.S. actions toward Canada.

A new round of tariffs is scheduled to take effect at 12:01 a.m. Wednesday unless an agreement is reached. The measures would apply a 50% rate to approximately $20 billion in Canadian products, including hockey sticks and tongue depressors. Canadian Prime Minister Mark Carney stated on Monday that negotiations are underway. “We are negotiating,” Carney said in French. “The negotiations are very intense and delicate. This is not the time to talk about negotiations in public.”

Last year, 72% of Canadian goods exports were directed to the United States. Ryan Majerus, a partner at King & Spalding and former U.S. trade official, said both governments are seeking to avoid implementation of the tariffs. “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.”

According to Majerus, U.S. objectives include increased Canadian purchases of American military equipment such as F-35 aircraft, participation in the proposed “Golden Dome” missile defense system, and expanded U.S. access to critical minerals to reduce dependence on supplies from China. Canadian priorities include relief from existing U.S. tariffs on steel, aluminum, and softwood lumber, which the United States has described as benefiting from government subsidies.

Trump has centered tariffs in his second-term trade policy. Last year the administration imposed additional import taxes on most countries, citing the U.S. trade deficit as a national emergency. The Supreme Court ruled in February that the measures exceeded statutory authority, leading to refunds for importers. In July the administration applied 10% to 12.5% tariffs on imports from 59 countries and the European Union, representing 99% of U.S. imports, on grounds that those jurisdictions had not adequately restricted goods produced with forced labor.

The administration has also invoked Section 338 of the Tariff Act of 1930 to impose the proposed 50% tariffs on goods accounting for about 5% of Canadian exports to the United States. Section 338 permits tariffs of up to 50% on imports from countries determined to discriminate against U.S. commerce and does not require a prior investigation or impose time limits on the measures. In announcing the tariffs, the administration stated that Canada discriminates against U.S. exports of automobiles, alcohol, and cheese. Canada and China were the only countries to impose retaliatory tariffs in response to earlier U.S. measures.

U.S. Trade Representative Jamieson Greer stated at the Iowa State Fair that retaliation would not be accepted. “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.”

The United States is also renegotiating the United States-Mexico-Canada Agreement. Christopher Gundermann, a fellow at the Center for Strategic and International Studies, said the tariff threat provides leverage in those talks. “From Carney’s perspective, you need (USMCA) to be renegotiated,” Gundermann said. “You can’t renegotiate it with a massive trade war going on.”

Daniel Béland, a political science professor at McGill University, noted that Canadian public reaction could constrain the government’s negotiating position. “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 on the part of the Trump administration.”

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

Gillies reported from Toronto.