The United States and Canada are in a race against the clock to reach a tariff agreement before a 12:01 am Wednesday deadline imposed by US President Donald Trump.Failure to strike a deal could see Trump impose 50% tariffs on $20 billion worth of Canadian products, including everything from hockey sticks to tongue depressors.Canadian Prime Minister Mark Carney confirmed that the talks were underway earlier on Monday, but gave little away about the negotiations.″We are negotiating,” Canadian Prime Minister Mark Carney told reporters Monday, speaking in French. “The negotiations are very intense and delicate. This is not the time to talk about negotiations in public.”Carney and Trump also spoke by phone Monday afternoon about the trade negotiations, according to Carney’s office, as both sides sought to make progress before the deadline.
Old trade disputes, new tensions
Trade disagreements between the US and Canada are not new. The neighbours have sparred for years over issues including Canadian softwood lumber exports and US demands for greater access to Canada’s protected dairy market.Yet those disputes have not stopped the two countries from maintaining a close relationship as allies, friends and major trading partners. Canadian troops fought alongside US forces in Afghanistan after 9/11, while their 5,525-mile border remains undefended.The scale of their economic and human ties is equally significant. Nearly 330,000 people and $2 billion worth of goods cross the border every day, while about 800,000 Canadians live in the United States.Trump’s stance on Canada has nevertheless shaken that traditionally cooperative relationship. His administration has imposed tariffs on Canadian goods as part of an effort to bring manufacturing back to the United States. Trump has also repeatedly spoken about making Canada America’s 51st state.The rhetoric and tariff measures have fuelled anger in Canada. A petition seeking the expulsion of US ambassador Pete Hoekstra, a Trump ally, had gathered nearly 218,000 signatures since July 21. It accuses Hoekstra of having “normalized’’ Trump’s talk of annexing Canada, among other things.
Both sides have reasons to step back
Canada has a major economic stake in the outcome of the negotiations. Nearly 72% of the country’s goods exports last year went to the United States.Washington, too, faces potential costs from another round of tariffs. The importers who pay the tariffs may try to pass those costs on to consumers through higher prices, at a time when American voters are already unhappy about the cost of living. The new tariffs would also come ahead of November’s midterm elections.“I don’t think either side really wants these tariffs to come into effect,’’ said Ryan Majerus, a partner at King & Spalding and a former US trade official. “There’s a pretty strong push on both sides to find an off ramp here.’’Majerus said Washington wants Canada to purchase more US military equipment, including F-35 fighters, participate in Trump’s “Golden Dome’’ missile defence system and provide the United States with greater access to critical minerals. The aim would be to reduce America’s reliance on supplies from China.Ottawa, meanwhile, wants the US to ease tariffs on steel and aluminium and softwood lumber. The United States has argued that Canadian softwood lumber receives unfair government subsidies.
Trump uses a century-old tariff weapon
The latest dispute comes as tariffs remain central to Trump’s second-term economic policy.Last year, Trump imposed double-digit import taxes on almost every country, citing the longstanding US trade deficit as a national emergency. The Supreme Court ruled in February that he had exceeded his authority, striking down those tariffs and paving the way for the federal government to issue refunds to importers.Trump subsequently looked for alternative ways to impose tariffs. Last month, his administration introduced import taxes of 10% to 12.5% on 59 countries and the European Union, which together account for 99% of US imports. The move was justified on the grounds that those countries allegedly failed to have or enforce restrictions on imports produced using forced labour.For Canada, Trump has reached further back, invoking Section 338 of the Tariff Act of 1930 to impose 50% tariffs on goods representing about 5% of Canadian exports to the US.Section 338 has never been used before. US trade officials have traditionally relied instead on Section 301 of the Trade Act of 1974, which Trump used for last month’s forced-labour tariffs.The 1930 provision allows the president to impose tariffs of up to 50% on imports from countries that have discriminated against US businesses. It does not require an investigation and does not set a limit on how long the tariffs can remain in place.Trump has accused Canada of discriminating against US exports of autos, alcohol and cheese. He has also singled out Canada and China because they were the only countries to respond with retaliatory tariffs after he imposed levies on their goods last year.“If a country retaliates against us, we’re obviously not going to tolerate that,” U.S. Trade Representative Jamieson Greer told reporters Friday at the Iowa State Fair. “We’ll take action. My sense is the Canadians, they want to have a more conciliatory approach, but we’ll see.”The tariff standoff is unfolding alongside negotiations over the US-Mexico-Canada Agreement, the North American trade pact that Trump pressured Canada and Mexico to accept during his first term.
