Trump, Carney talk as Canada seeks to hold off 50% US tariffs

On Tuesday, Canadian Prime Minister Mark Carney engaged in urgent telephone discussions with US President Donald Trump as the deadline for 50% US tariffs on Canadian goods loomed. The White House had accused Canada of the discriminatory treatment of US alcohol, automotive and dairy products, justifying the steep duties imposed last month. The tariffs were set to take effect at midnight, affecting products like wine, hockey sticks and cement.

Efforts to prevent the tariffs were still underway, with a deal awaiting Trump's approval. A White House official stated that any announcement would be made directly by Trump. Carney had spoken with Trump on Tuesday afternoon and on Monday, when Carney had noted that the negotiations to avoid the duties were at an intense and delicate stage.

Targeting around 5.5% of Canada's exports to the US, worth approximately $20 billion, the tariffs would have a modest negative impact on Canada's economy, according to Oxford Economics. However, the duties would disproportionately affect central Canada's manufacturing sector. Canadian negotiators had been present in Washington to secure relief from the sector-specific duties and push for a deal to avoid the new tariffs.

Ottawa had reportedly offered concessions, such as pressuring provinces to reintroduce US alcohol and wine to their shelves. Yet, the possibility of a deal remained uncertain.

Political factors complicated the situation, as former US commerce official Christopher Padilla explained that such trade negotiations could go down to the wire. The Trump administration might have threatened new tariffs to gain early concessions from Canada while negotiating over renewing the US-Mexico-Canada free trade agreement (USMCA). Even if a pact was reached, it might be rejected by Trump, who could target Canada over other political concerns like deepening economic ties with China or Europe.

Oxford Economics predicted that the manufacturers most affected by the tariffs included those in the cement, paper, printing, wood, clothing and electronics equipment sectors. With the US Supreme Court overturning many of Trump's global tariffs, the president had employed an untested legal provision for the new duties targeting Canada.

The tariffs would not apply to Canadian energy, potash or goods already facing sector-specific tariffs, but would target products covered by the USMCA. US trade envoy Jamie Greer stated that the duties aimed to hold Canada accountable for its retaliation against the US, including the removal of US alcohol products from provincial shelves and better market access for dairy products from the European Union.