Carney and Trump hold last-minute talks as Canada tries to avoid 50% US tariffs on nearly $20B in exports, with auto duties a key issue
Prime Minister Mark Carney and US President Donald Trump have held another round of high-stakes talks as Canada scrambles to avert Washington’s planned 50 per cent tariffs on nearly $20 billion worth of Canadian exports.
The call, the second between the two leaders in a matter of days, underscored the intensity of negotiations that have dragged on for weeks without resolution. Yet, as the deadline loomed, neither side signalled that a breakthrough was within reach.
If implemented, the tariffs would represent a sharp escalation in Trump’s trade offensive against one of America’s most important economic partners. They would hit about $20 billion in Canadian goods, including products that currently benefit from preferential access under the US-Mexico-Canada Agreement (USMCA).
Carney’s office confirmed only that discussions had taken place. The White House and the US Trade Representative’s office offered no substantive comment on the state of play.
Auto tariffs remain central sticking point
At the heart of the impasse is the automotive sector, where US tariffs on Canadian-built vehicles have become the most contentious issue, according to industry sources familiar with the talks.
Both sides have explored a possible reduction in US Section 232 tariffs on Canadian vehicles to 15 per cent from 25 per cent, with further relief tied to the level of US content in each vehicle. But agreement has stalled over how that content should be defined.
More from BusinessWashington is insisting that only US-produced components qualify. Ottawa is pushing for a broader North American definition that would include Canadian and Mexican inputs.
The disagreement goes to the core of a deeply integrated supply chain. Roughly half the value of a vehicle assembled in Canada originates in the United States, according to a senior Canadian auto industry official — a reality that complicates any attempt to impose tariffs without also hitting US suppliers.
Even a reduced 15 per cent tariff would remain painful for the sector. Industry margins averaged about 6 per cent before the current round of US measures, leaving manufacturers with little capacity to absorb additional costs.
Canadian Trade Minister Dominic LeBlanc and chief negotiator Janice Charette have been in Washington for days in an effort to narrow the gap. On Monday, they held nearly two hours of talks with US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick.
The dispute comes at a delicate moment for both governments, which are also engaged in wider discussions over the future of the USMCA. A breakdown on tariffs risks spilling over into those broader negotiations.
Trump announced the measures in July, invoking Section 338 of the Tariff Act of 1930 — a rarely used provision allowing the president to impose duties of up to 50 per cent on countries deemed to discriminate against US goods. Washington has pointed to Canadian policies affecting autos, alcohol and dairy as justification.
Ottawa has rejected those claims outright, arguing instead that earlier US tariffs breached the spirit and terms of the North American trade framework.
The Canadian government has also made clear it is prepared to respond in kind if the measures proceed. Carney has pledged to defend national interests, while officials have indicated that retaliation, targeted support for affected industries and even a pause in broader bilateral engagement remain on the table.
For now, however, both capitals are watching the clock. Whether the latest round of Carney-Trump diplomacy produces a last-minute compromise — or ushers in a new phase of trade confrontation between the two neighbours — remains an open question.
