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

US President Donald Trump announced on Wednesday he will postpone imposing new tariffs on Canadian goods for three days, as the two countries work towards finalizing a trade deal. This decision came just hours before the tariffs, which would have levied 50% on nearly $20bn (C$28bn) of Canadian imports, were set to take effect. The two nations have been struggling to reach an agreement on several issues, such as US tariffs on vehicles and Canadian provinces prohibiting American liquor sales.

Trump and Prime Minister Mark Carney had discussed the matter twice this week, with trade negotiators engaging in rigorous talks since July following Trump's initial threat to impose the tariff on 19 August. Trump further suggested that a successful trade deal could potentially revive the Keystone XL pipeline, an oil pipeline that had been blocked by both the Obama and Biden administrations due to environmental and indigenous concerns.

However, Trump has previously expressed his desire to revive the project, estimating it to carry 830,000 barrels of oil a day. The extension is seen as positive news for Canadian negotiators and businesses on both sides of the border, who had previously warned that the new tariffs would negatively impact their economies. Tensions between the US and Canada have escalated since Trump took office in January 2021, with both countries imposing a wide range of tariffs on each other's goods, disrupting decades-long free trade relations.

The latest tariffs targeted various Canadian imports, including wine, dairy, cement, clothing, and hockey equipment, on top of existing tariffs imposed by the US on Canadian steel, aluminum, automobiles, and lumber. Canada has been seeking a deal that would result in the US lowering or eliminating tariffs on these crucial sectors, while the US has been requesting concessions from Canada, such as the removal of its retaliatory tariffs on American autos and the adjustment of dairy quotas to allow more access for US cheese producers.

Additionally, the US has asked for the lifting of the ban on US alcohol sales imposed by most Canadian provinces in response to Trump's tariffs. In the final hours leading to the deadline, negotiators discussed a deal that would lower US tariffs on Canadian autos from 25% to 15%, according to a Reuters report using anonymous sources.

However, they were unable to agree on which vehicles would qualify for the reduced tariffs, with the US pushing for the application of the reduction solely on cars with a high percentage of American-made content. Carney will also need support from provincial premiers to reinstate the sale of US alcohol, as liquor sales are governed by the provinces, not the federal government.

Ontario Premier Doug Ford, whose province is most affected by US tariffs on automobiles, expressed willingness to lift the liquor ban only if a "fair deal" is reached. On Tuesday, the US Chamber of Commerce advocated for a successful deal, stating in a statement that "higher tariffs would harm both economies, increase costs for US families, disrupt critical supply chains, and endanger the 13 million American jobs reliant on trade under the US-Mexico-Canada Trade Agreement."