US-Canada rush for tariff truce before Trump's 50% duties deadline

Washington,UPDATED: Aug 19, 2026 04:02 IST

The United States and Canada are in last-minute talks to try to reach a truce on tariffs before a 12.01 am Wednesday deadline set by US President Donald Trump. If no deal is reached, Trump has threatened to impose 50 per cent tariffs on USD 20 billion worth of Canadian products, from hockey sticks to tongue depressors.

Canadian Prime Minister Mark Carney and Trump have spoken twice by phone in the past two days, including again on Tuesday afternoon, Carney's office said. The push for a deal comes as both sides try to avoid a fresh escalation in a trade dispute that is tied to wider talks over market access, military purchases and the renegotiation of the US-Mexico-Canada Agreement.

"We are negotiating," Carney told reporters on Monday, speaking in French. "The negotiations are very intense and delicate. This is not the time to talk about negotiations in public." The two countries have argued for decades over issues such as Canadian softwood lumber imports and US access to Canada's protected dairy market, but they have remained close allies and major trading partners. Nearly 330,000 people and USD 2 billion worth of goods cross the 5,525-mile border every day, and about 800,000 Canadians live in the United States.

Trump's handling of Canada marks a sharp break from that traditionally cooperative relationship. He has imposed tariffs on Canadian goods as part of his effort to bring manufacturing back to the US, and has repeatedly spoken about making Canada America's 51st state. Public frustration in Canada has grown, and a petition seeking the expulsion of US ambassador Pete Hoekstra has gathered nearly 218,000 signatures since July 21, accusing him of having "normalized" Trump's talk of annexing Canada.

Nearly 72 per cent of Canada's goods exports last year went to the United States. At the same time, the Trump administration may be cautious about imposing a steep new tariff ahead of November's midterm elections, as US importers would pay the duty and could pass the cost on through higher prices. "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 buy more US military equipment, including F-35 fighters, join Trump's "Golden Dome" missile defence project, and give the US greater access to critical minerals to reduce reliance on supplies from China. Canada, for its part, wants relief from US tariffs on steel and aluminium as well as softwood lumber, which Washington says benefits from unfair government subsidies.

Tariffs have become central to Trump's second-term economic agenda. Last year, he imposed double-digit import taxes on almost every country, saying the long-running US trade deficit was a national emergency. In February, the Supreme Court ruled that he had exceeded his authority, struck down those tariffs and set the stage for the federal government to refund importers. Trump then turned to other tools and last month imposed import taxes of 10 per cent to 12.5 per cent on 59 countries and the European Union, alleging they had failed to have or enforce restrictions on imports made with forced labour.

He has now invoked Section 338 of the Tariff Act of 1930 to target Canada with 50 per cent tariffs on products accounting for about 5 per cent of Canadian exports to the United States. The law is part of the Smoot-Hawley tariffs, which economists and historians say restricted global trade and worsened the Great Depression. Section 338 has never been used before. Unlike Section 301 of the Trade Act of 1974, no investigation is required, and there is no limit on how long the tariffs can remain in place.

In announcing the Section 338 tariffs, Trump said Canada discriminates against US exports of autos, alcohol and cheese. He is also angered by the fact that Canada and China were the only countries to respond with retaliatory tariffs after he imposed levies on their products last year. "If a country retaliates against us, we're obviously not going to tolerate that," US Trade Representative Jamieson Greer told reporters on 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 US is also renegotiating the US-Mexico-Canada Agreement, the North American trade pact that Trump pushed through in his first term, and the threat of Section 338 tariffs gives Washington added leverage in those talks. "From Carney's perspective, you need (USMCA) to be renegotiated," said Christopher Gundermann, a fellow in the economics programme at the Center for Strategic and Studies. "You can't renegotiate it with a massive trade war going on."

Even so, anger in Canada over Trump's policies may narrow Carney's room for compromise, and Ottawa could retaliate again if the new tariffs take effect. Daniel Bland, a political science professor at McGill University in Montreal, said Canada's government "cannot look like it is simply caving to the Trump administration's demands". He added, "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 bullying on the part of the Trump administration."

Canada's minister for US trade, Dominic LeBlanc, met Greer on Monday but gave little away afterward. "The work is continuing," he said. "We continue to do our job." With the deadline hours away, both sides are still negotiating to avoid 50 per cent tariffs that could deepen the trade dispute and complicate wider talks between the two neighbours.

With PTI Inputs

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