Trump, Carney hold talks as new US tariffs on Canada loom

On Monday, Canadian Prime Minister Mark Carney engaged in urgent telephone conversations with US President Donald Trump to discuss ongoing trade negotiations, according to a Canadian official. The talks aimed to prevent fresh US tariffs on Canadian goods from taking effect at midnight, as reported by Ottawa on Tuesday. President Trump imposed 50% tariffs in the previous month, citing perceived discriminatory treatment against US alcohol, automobile, and dairy products from Canada.

These tariffs, set to commence on Wednesday, will impact products such as wine, hockey sticks, and cement, covering around 5.5% of Canada's exports to the US, valued at approximately US$20 billion, as estimated by Oxford Economics. While this represents a modest risk to Canada's economy, the duties could disproportionately affect central Canada's manufacturing sector, particularly in the cement, paper, printing, wood, clothing, and electronics equipment sectors.

Efforts to avoid the tariffs are ongoing, with a potential deal awaiting President Trump's approval. A White House official emphasized that any announcement of a deal would come directly from Trump, and any speculation should be regarded as baseless for now. Canadian negotiators have been in Washington to secure a deal to avoid the tariffs and obtain relief on specific sector duties imposed by Trump.

Recent concessions from Canada include pressuring provinces to reintroduce US alcohol and wine products onto their shelves and providing better market access to EU dairy products. However, it remains uncertain if a deal is imminent. Former US Commerce Official Christopher Padilla noted that it is not uncommon for trade negotiations to extend to the deadline, and the Trump administration's threats of new tariffs may have been intended to secure early concessions from Canada during ongoing negotiations over the US-Mexico-Canada free trade agreement (USMCA).

Even if a pact is reached, it could still be rejected by Trump, who has a history of penalizing allies for various political concerns, such as Canada's deepening economic ties with Europe or China.