Canada and U.S. Restart Trade Negotiations to Avoid Impending Tariffs

Canadian officials returned to Washington on Thursday morning for another round of talks, seeking to avert damaging new tariffs set to take effect Saturday and to protect Canada’s largest trade relationship.

Dominic LeBlanc, Canada’s minister responsible for U.S. trade, and Janice Charette, the chief trade negotiator, met with U.S. Trade Representative Jamieson Greer shortly after noon in his office, according to LeBlanc’s office.

Roughly three hours later, LeBlanc spoke briefly with reporters as he left the meeting.

“We’re very close, and we’re still making progress,” he said, noting that Charette remained inside continuing talks with U.S. officials. “We’ll stay and see this through.”

Prime Minister Mark Carney and his team must now decide whether to accept a U.S. proposal that falls far short of Canada’s objectives, or risk facing 50 percent tariffs on tens of billions of dollars of Canadian exports.

On Tuesday night, President Trump paused the proposed sweeping tariffs and said the two sides had reached an agreement that only needed final details and paperwork. However, if Canada does not seal the deal by early Saturday morning, new tariffs on roughly $20 billion of Canadian exports will go into effect.

Individuals familiar with the negotiations on both sides said the talks are still active and involve more than just tying up loose ends.

The main obstacles involve the three Canadian sectors that Trump hit with tariffs as high as 50 percent last year: steel, aluminum and lumber.

In the negotiations, U.S. officials have suggested lowering tariffs on certain Canadian steel and aluminum shipments from 50 percent to 25 percent, according to three sources familiar with the plan. That level remains roughly double what Canada is seeking.

Canadian steel exports would also be subject to a quota that limits how much volume could receive the reduced tariff, another source said. At home, the Trump administration is encountering pushback from U.S. steel mills, which contend the change would hurt their output.

For automobiles, the tariff Trump imposed last year could be cut from 25 percent to 15 percent, with a credit for U.S.-made parts, according to three industry executives.

One individual briefed on the talks said Canada is resisting the auto proposal. He noted that the 15 percent figure appears intended to mirror the tariff Trump placed on Japanese and Korean automobiles. Since the U.S. has not budged on the rate, Canada is suggesting an effective reduction by granting credit for both Canadian and U.S. components.

The Office of the U.S. Trade Representative and the White House did not immediately reply to a request for comment.

Trump’s existing auto tariffs have disrupted free trade in a sector that has been integrated since 1965. He has repeatedly characterized Canadian‑built vehicles as imports the United States should avoid.

Negotiators are also reviewing key rules that govern the North American auto industry under the United States‑Mexico‑Canada Agreement.

The Trump administration wants to raise the North‑American content threshold for vehicles from 75 percent to 82 percent, and to mandate that half of a car’s materials originate in the United States. Canada and Mexico have opposed a U.S.–specific content rule, and industry executives say the administration’s demand is likely an opening bid that will be trimmed in negotiations.

Nevertheless, the U.S. attempt to reshape North‑American auto rules could damage Canadian interests. Several industry insiders and experts warn that a 15 percent tariff on automobiles would eventually jeopardize Canada’s auto sector.

Historically, the United States has enjoyed a modest trade surplus in autos with Canada. Over the past decade, shipments from Canada by the three Detroit‑based automakers have fallen sharply, leaving Toyota and Honda as the dominant producers in the country.

Since Trump took office, Stellantis shifted production of a new Jeep from Ontario to Illinois, vacating a Canadian plant. General Motors shut down an electric‑van facility in Ontario and cut its pickup‑truck line to a single shift. Honda scrapped a planned major expansion for EVs and batteries in Canada, though it recently announced a new U.S. factory.

Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said that once U.S. parts are factored in, a 15 percent tariff works out to about 7.5 percent. He added that typical auto profit margins hover near 6 percent.

He also warned that the U.S. content discount would likely push firms to source more American components, harming Canada’s industry.

Greig Mordue, a former Toyota Canada executive, said a 10 percent tariff could render Canadian factories barely profitable but would not stop their gradual decline, even given the challenges and costs of relocating production.

“It becomes a long‑term bleed,” he said, adding that any auto tariffs leave the industry on a negative trajectory at every level.

The outcome of the U.S.–Canada talks carries significant implications for Mexico, which is negotiating separately with the Trump administration over the future of the USMCA. Mexican Economy Secretary Marcelo Ebrard returned to the U.S. Trade Representative’s office on Wednesday for further talks, following meetings the previous evening.

Those discussions focused on the sector‑specific tariffs the Trump administration has imposed on cars and parts, and on how USMCA rules governing auto trade might be altered, according to a source familiar with the meetings.

Canada seems to have conceded to one U.S. request: ending the boycott of American wine and spirits by provincially owned liquor stores in eight of the ten provinces.

In a virtual meeting with Canada’s premiers on Wednesday, Prime Minister Carney urged the provinces that have barred U.S. liquor sales to reinstate them, Nova Scotia Premier Tim Houston reported.

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