Canada is seeking a deal to dodge further
economic pain at the hands of the Trump administration on midnight Tuesday. But
at what cost?
·
Midnight
deadline: Canada is facing a U.S. tariff deadline
on Tuesday midnight, with
new levies taking effect unless negotiators reach an agreement.
·
U.S.
negotiating position: U.S. Trade Representative Jamieson
Greer said Washington expects Canada to
withdraw some of its retaliatory measures against U.S. tariffs.
·
Canada
seeks concessions: Prime Minister Mark
Carney has directed Canadian officials to offer targeted
concessions in return for preventing the new tariffs
and reducing existing U.S. duties.
·
New
50% tariffs: The Trump administration plans 50%
tariffs on more than 500 Canadian products,
covering around $20 billion in annual trade, or
about 2% of bilateral goods trade.
·
Sectors
already facing tariffs: Canadian steel,
aluminum and automobiles are
already subject to tariffs of up to 50%,
while Canadian softwood lumber also faces various U.S. duties.
·
U.S.
demands on Canada: Washington is seeking:
o Higher quotas for duty-free
U.S. dairy products entering Canada.
o Removal of Canada’s 25%
retaliatory tariffs on U.S. automobiles.
o Restoration of access for U.S.
liquor in Canadian provincial distribution
systems.
·
Canada’s
bargaining position: Ottawa is reportedly willing to consider
these measures, but wants substantial reductions in U.S. sectoral
tariffs in return—not merely cancellation of the
threatened new tariffs.
·
Carney
rejects piecemeal deals: Prime Minister Carney
wants a broader agreement that
provides lasting relief rather than a series of temporary “mini-deals”
requiring repeated renegotiation.
·
Political
challenge: Carney must balance economic negotiations
with domestic pressure to stand up to President Trump and
avoid appearing to surrender concessions under tariff threats.
·
Previous
Canadian concessions: Canada has already withdrawn some
retaliatory tariffs, cancelled an online tax opposed by U.S. technology
companies and agreed to share revenues from a Detroit–Ontario bridge project.
·
Three
possible outcomes:
1. Full deal:
Canada makes concessions in exchange for removal of new tariffs and easing of
existing duties.
2. No deal: New 50%
tariffs take effect while existing tariffs
remain.
3. Deadline extension: No
final deal, but sufficient progress allows Washington to delay
the new tariffs for further negotiations.
·
Risk
of escalation: If the new tariffs take effect, Canada is
expected to consider fresh retaliatory measures,
potentially intensifying the trade dispute.
·
Broader
significance: The negotiations come amid growing
uncertainty surrounding the USMCA, increasing
tariff tensions and the deterioration of the traditional North American
free-trade framework.
[ABS News Service/18.08.2026]
Canada
is bracing for a U.S. tariff deadline arriving at midnight on Tuesday, when a number
of new levies by the Trump administration will come into effect unless negotiators
strike an 11th-hour deal.
The
United States’ trade representative, Jamieson Greer, who is heading the talks for
the U.S. side, said last week that the negotiators were reviewing options and that
he expected Canada to drop certain measures it had already taken in response to
U.S. tariffs.
“If
a country retaliates against us, we’re obviously not going to tolerate that,” Mr.
Greer told reporters in Iowa on Friday. “We’ll take action. My sense is the Canadians
want to have a more conciliatory approach, but we’ll see.”
Prime
Minister Mark Carney has instructed Canadian officials, who stayed in Washington
over the weekend to continue talks with their U.S. counterparts, to offer targeted
concessions in order to both keep the new tariffs from taking effect and ease existing
levies on key Canadian goods.
It’s
a tall order. President Trump has been sharply focused on squeezing Canada through
tariffs, and this month he increased his belligerent rhetoric toward the state,
the United States’ closest ally and second-largest trading partner, calling its
leadership “nasty.”
In
comments to the news media on Monday, Mr. Carney said he expected to talk by phone
with Mr. Trump before the Tuesday midnight deadline.
What are the tariffs being
negotiated?
The
new tariff threat comes amid a breakdown in the United States-Canada-Mexico free-trade
agreement, which the Trump administration declined to fully renew, prompting annual
reviews. This has set the stage for a permanent state of flux in the most important
trade relationships the United States has and the decades-old trade order in North
America.
On
top of that turmoil, in July, the Trump administration said it planned to impose
new tariffs of 50 percent on more than 500 Canadian goods, including hockey sticks
and cheese. Those add up to $20 billion worth of annual trade, about 2 percent of
the entire goods trade between the two neighbors.
Certain
key Canadian industries are already under a separate set of tariffs, which Canadian
negotiators want to see significantly eased in these negotiations. They include
tariffs of up to 50 percent on steel, aluminum and autos.
A variety of tariffs also affect Canadian softwood lumber.
Wine and cheese are on the
table
Mr.
Greer has made it clear that the United States expects Canada to take a number of
steps if a deal is to be reached.
They
include adjusting quotas for the duty-free entry of American dairy products into
Canada’s tightly protected market; dropping Canada’s 25 percent retaliatory tariffs
on U.S. autos; and restoring the sale of U.S. liquor in the government-controlled
monopolies that distribute alcohol across most Canadian provinces.
Canadian
officials, speaking on condition of anonymity to discuss the state of the confidential
talks, said that these were things Canada was prepared to do, but only in exchange
for substantial improvements in the sectoral tariffs on Canadian goods exports to
the United States, not merely for scrapping the threatened new round.
Carney doesn’t want mini-deals
Mr.
Carney wants an agreement that will ease the pain on the Canadian economy and stave
off new tariffs. But he has indicated that he is not prepared to make concessions
in exchange for a series of mini-deals that he would need to renegotiate down the
line.
Canadians,
particularly those who voted for Mr. Carney, are also loath to see Mr. Trump gain
concessions through the repeated threats of tariffs.
“Canadians
elected Mark Carney to both stand up to Trump while also trying to negotiate a deal,
or negotiate down the tariffs, and I don’t think those are mutually exclusive, but
it is a narrow path for sure,” said Brian Clow, a former senior official in Prime
Minister Justin Trudeau’s government.
Mr.
Carney has already made a number of concessions at various flash points over the
past year, but he finds himself again facing the threat of more tariffs.
After
Mr. Carney took office last spring, Canada dropped some retaliatory tariffs that
Mr. Trudeau had put in place. The government canceled
an online tax that was anathema to the U.S. tech industry and agreed to share revenues
from a new bridge connecting Detroit with Ontario, despite the fact that Canada
had paid for it entirely, after Mr. Trump threatened to block the bridge’s opening.
What are the possible outcomes?
There
are three scenarios for where things could land when the clock strikes midnight.
One:
a deal. Canada and the United States could reach an agreement that involves Canadian
concessions in exchange for scrapping the new U.S. tariffs and easing the existing
ones.
Two:
no deal. The new 50 percent tariffs would come in, and the old ones would stay in
place.
Three:
deal delayed. A full compromise would not be reached by midnight, but enough progress
would have been made to allow the United States to push back the threatened new
tariffs, to give negotiators more time.
The
second scenario would herald further escalation, Mr. Clow said, as it would most
likely lead Mr. Carney to put in place new retaliatory measures and reclaim negotiating
power.
“If
the U.S. decides to proceed with imposing these new tariffs tomorrow, Canada, although
this current government has eased back on retaliation, will have to respond in some
way,” Mr. Clow said.