Canada is bracing for a U.S. tariff deadline arriving at midnight on Tuesday, when a number of new levies by the Trump administration will come into effect unless negotiators strike an 11th-hour deal.
The United States’ trade representative, Jamieson Greer, who is heading the talks for the U.S. side, said last week that the negotiators were reviewing options and that he expected Canada to drop certain measures it had already taken in response to U.S. tariffs.
“If a country retaliates against us, we’re obviously not going to tolerate that,” Mr. Greer told reporters in Iowa on Friday. “We’ll take action. My sense is the Canadians want to have a more conciliatory approach, but we’ll see.”
Prime Minister Mark Carney has instructed Canadian officials, who stayed in Washington over the weekend to continue talks with their U.S. counterparts, to offer targeted concessions in order to both keep the new tariffs from taking effect and ease existing levies on key Canadian goods.
It’s a tall order. President Trump has been sharply focused on squeezing Canada through tariffs, and this month he increased his belligerent rhetoric toward the state, the United States’ closest ally and second-largest trading partner, calling its leadership “nasty.”
In comments to the news media on Monday, Mr. Carney said he expected to talk by phone with Mr. Trump before the Tuesday midnight deadline.
What are the tariffs being negotiated?
The new tariff threat comes amid a breakdown in the United States-Canada-Mexico free-trade agreement, which the Trump administration declined to fully renew, prompting annual reviews. This has set the stage for a permanent state of flux in the most important trade relationships the United States has and the decades-old trade order in North America.
On top of that turmoil, in July, the Trump administration said it planned to impose new tariffs of 50 percent on more than 500 Canadian goods, including hockey sticks and cheese. Those add up to $20 billion worth of annual trade, about 2 percent of the entire goods trade between the two neighbors.
Certain key Canadian industries are already under a separate set of tariffs, which Canadian negotiators want to see significantly eased in these negotiations. They include tariffs of up to 50 percent on steel, aluminum and autos. A variety of tariffs also affect Canadian softwood lumber.
Wine and cheese are on the table
Mr. Greer has made it clear that the United States expects Canada to take a number of steps if a deal is to be reached.
They include adjusting quotas for the duty-free entry of American dairy products into Canada’s tightly protected market; dropping Canada’s 25 percent retaliatory tariffs on U.S. autos; and restoring the sale of U.S. liquor in the government-controlled monopolies that distribute alcohol across most Canadian provinces.
Canadian officials, speaking on condition of anonymity to discuss the state of the confidential talks, said that these were things Canada was prepared to do, but only in exchange for substantial improvements in the sectoral tariffs on Canadian goods exports to the United States, not merely for scrapping the threatened new round.
Carney doesn’t want mini-deals
Mr. Carney wants an agreement that will ease the pain on the Canadian economy and stave off new tariffs. But he has indicated that he is not prepared to make concessions in exchange for a series of mini-deals that he would need to renegotiate down the line.
Canadians, particularly those who voted for Mr. Carney, are also loath to see Mr. Trump gain concessions through the repeated threats of tariffs.
“Canadians elected Mark Carney to both stand up to Trump while also trying to negotiate a deal, or negotiate down the tariffs, and I don’t think those are mutually exclusive, but it is a narrow path for sure,” said Brian Clow, a former senior official in Prime Minister Justin Trudeau’s government.
Mr. Carney has already made a number of concessions at various flash points over the past year, but he finds himself again facing the threat of more tariffs.
After Mr. Carney took office last spring, Canada dropped some retaliatory tariffs that Mr. Trudeau had put in place. The government canceled an online tax that was anathema to the U.S. tech industry and agreed to share revenues from a new bridge connecting Detroit with Ontario, despite the fact that Canada had paid for it entirely, after Mr. Trump threatened to block the bridge’s opening.
What are the possible outcomes?
There are three scenarios for where things could land when the clock strikes midnight.
One: a deal. Canada and the United States could reach an agreement that involves Canadian concessions in exchange for scrapping the new U.S. tariffs and easing the existing ones.
Two: no deal. The new 50 percent tariffs would come in, and the old ones would stay in place.
Three: deal delayed. A full compromise would not be reached by midnight, but enough progress would have been made to allow the United States to push back the threatened new tariffs, to give negotiators more time.
The second scenario would herald further escalation, Mr. Clow said, as it would most likely lead Mr. Carney to put in place new retaliatory measures and reclaim negotiating power.
“If the U.S. decides to proceed with imposing these new tariffs tomorrow, Canada, although this current government has eased back on retaliation, will have to respond in some way,” Mr. Clow said.
