US-Canada tariff row eases: Trump pauses 50% levies after last-minute deal

President Donald Trump's planned 50% tariffs on $20 billion worth of Canadian imports were temporarily paused on Tuesday, after Canada and the United States reached a last-minute deal to negotiate a broader trade agreement. The tariffs were set to take effect at 12.01 am but were announced to be paused by Trump on social media after the two sides secured a "DEAL".

The deal, which is subject to the finalization of documents, is expected to provide the two countries with more time to negotiate a comprehensive trade agreement. The tariffs would have affected approximately 5% of Canadian exports to the United States, impacting items such as hockey sticks and tongue depressors. Canada had threatened to retaliate, raising concerns of further escalation between the two close trading partners.

This is not the first trade dispute between the US and Canada under Trump's administration. He has previously discussed making Canada the 51st US state and has repeatedly mentioned Canada's potential to become a US state. The two nations share a trade volume of about $880 billion worth of goods and services annually, with nearly 330,000 people and $2 billion worth of goods crossing the border daily.

Canada's economy is particularly vulnerable to trade disruptions, as nearly 72% of its goods exports go to the US. Moreover, the US may face higher prices if importers pass tariff costs onto consumers. The US has been seeking greater Canadian purchases of US military equipment, participation in its missile defense system, and access to critical minerals. Canada, on the other hand, is looking for relief from existing US tariffs on Canadian steel, aluminum, and softwood lumber.

The negotiations are taking place alongside talks on the US-Mexico-Canada Agreement, the North American trade pact that governs trade among the three countries.