Trump pauses new tariffs on Canada and says countries close to a deal

President Donald Trump has postponed the initiation of new 50% tariffs on Canadian goods for three days as the two nations work towards finalizing a trade agreement. In a post on social media, Trump stated, "I have paused the 50% Tariffs against Canada, that were scheduled to kick in tomorrow morning for a three day period, based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!"

This announcement occurred less than two hours before the scheduled levy on nearly $20bn (C$28bn) of Canadian imports.

The impasse between the United States and Canada has centered on various issues, including US tariffs on autos and each side's restrictions on liquor sales. Trump and Prime Minister Mark Carney have held two conversations this week, and trade negotiators have been engaged in intense discussions since July, following Trump's threat to impose the new tariffs on August 19.

Trump also suggested that a final trade deal might pave the way for reviving the Keystone XL pipeline. The oil pipeline, intended to link Alberta with the US, was halted by both the Obama and Biden administrations due to opposition from environmentalists and indigenous groups. However, Trump has previously expressed a desire to revive the project, which would transport 830,000 barrels of oil daily.

The prospect of a trade deal has been met with relief by Canadian negotiators and businesses on both sides of the border, who anticipate the tariffs' detrimental impact on their economies. Tensions between the two major trading partners have escalated since Trump took office in January 2021, as he initiated a broad-based global tariffs program that disrupted the long-standing free trade relationship between Canada and the US.

Canada had sought a deal to eliminate or reduce US tariffs on key sectors such as wine, dairy, cement, clothing, and hockey equipment. Meanwhile, the US demanded concessions, including the removal of retaliatory tariffs on American autos and adjustments to Canada's dairy quotas to enable increased access for US cheese producers.

Additionally, Canada asked for the elimination of the ban on US alcohol sales, which most Canadian provinces imposed as retaliation for Trump's tariffs. Provincial premiers would need to approve lifting the ban, as liquor sales are managed by the provinces, not the federal government.

In the closing hours before the deadline, negotiators discussed a deal that would lower US tariffs on Canadian autos from 25% to 15%. However, a disagreement persisted over which vehicles would be eligible for tariff reductions, with the US advocating for a reduction applicable only to cars with a substantial amount of American-made content.

The US Chamber of Commerce urged a swift resolution, stating that higher tariffs would harm both economies, increase costs for American families, disrupt critical supply chains, and jeopardize the 13 million jobs dependent on trade under the US-Mexico-Canada Trade Agreement.