Trump pauses 50% tariffs on Canadian imports as Washington and Ottawa negotiate lower duties on steel, aluminium and auto exports
The United States and Canada are moving towards a trade agreement that could lower tariffs on certain Canadian steel and aluminium exports to 25 per cent and cut duties on the non-US content of Canadian automobile exports to 15 per cent, Bloomberg News reported, citing people familiar with the negotiations.
The potential deal marks a significant shift after US President Donald Trump agreed to delay planned 50 per cent tariffs on about $20 billion worth of Canadian imports, giving negotiators three more days to finalise an agreement.
Trump said on Tuesday that the US and Canada had reached a deal in principle, although both sides acknowledged that important details still needed to be settled.
“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!” Trump said in a post on Truth Social.
The tariffs had been scheduled to take effect at 12:01 a.m. Wednesday. Had they gone ahead, they would have affected a wide range of Canadian products, from manufactured goods to everyday items.
More from BusinessSteel, aluminium tariffs could fall to 25%
Under the emerging agreement, US tariffs on certain Canadian steel and aluminium exports could be reduced to 25 per cent from the current 50 per cent rate, according to Bloomberg News.
However, the reduction is not expected to apply across the board. Different tariff rates could be imposed on some derivative products that contain steel and aluminium, people familiar with the discussions said.
The two countries are also considering exclusions and other measures that could alter the coverage of the tariffs.
Canada has made lowering the metals tariffs a central part of its negotiations with Washington. The country is the largest source of aluminium imports for the US, while American domestic production is not sufficient to meet demand.
That means the cost of tariffs on Canadian aluminium has largely been passed on to US buyers.
US manufacturing groups, however, are pushing the Trump administration to retain higher tariffs on derivative aluminium products. The Coalition for a Prosperous America and other industry stakeholders have argued that a lower rate on primary aluminium combined with 50 per cent tariffs on derivative products would offer greater protection to US fabricators.
They have warned that around 125,000 US jobs linked to aluminium rolling, drawing and extruding could be at risk.
Canadian supplies currently account for about half of US aluminium consumption, highlighting the importance of the trade relationship to both countries.
Auto tariffs may also be reduced
The US is also considering cutting tariffs on the non-US content of automobiles imported from Canada to 15 per cent from 25 per cent, according to people familiar with the negotiations.
The potential concession would be important for Canada’s automobile industry, which is deeply integrated with US manufacturing supply chains.
Canadian Prime Minister Mark Carney appeared to point to such preferential treatment in a social media post on Wednesday, saying negotiators were moving towards a deal offering “the best terms in each of Canada’s most important strategic sectors”.
The proposed rates would put Canada closer to preferential arrangements already available to some other US trading partners. The UK has secured a 25 per cent rate for steel, while Japan and South Korea have received 15 per cent treatment for autos.
Why Trump delayed the tariffs
The decision to pause the tariffs came less than two hours before the new levies were due to take effect, underlining the pressure on both governments to avoid another escalation.
Trump’s move followed a last-minute push by US and Canadian officials to find common ground. Trump and Carney spoke twice by telephone over two days, including a call on Tuesday afternoon, according to the Canadian prime minister’s office.
Carney said substantial progress had been made but acknowledged that important work remained.
The two governments had strong incentives to step back from the brink.
Around 72 per cent of Canada’s goods exports went to the US last year, making the American market critical to the Canadian economy. At the same time, imposing higher tariffs could increase costs for US importers and eventually consumers, potentially adding to inflationary pressure ahead of the November midterm elections.
The US and Canada traded about $880 billion in goods and services last year, according to figures cited by the Associated Press.
Canada offers concessions to US
A White House proclamation said Canada had committed to removing measures that the Trump administration considers discriminatory against US alcohol, dairy and motor vehicle exports. Canada had not immediately confirmed those commitments.
The concessions are important because Trump has repeatedly argued that Canada maintains barriers that disadvantage US producers, even though the two countries have one of the world’s most integrated trading relationships.
The emerging agreement therefore appears to combine tariff relief for selected Canadian exports with commitments from Ottawa to address US concerns over market access.
For Carney, however, the deal could carry domestic political risks if Canada is seen as accepting tariffs that remain well above the rates that applied historically.
Trump’s broader tariff strategy
The Canada dispute is part of Trump’s wider effort to use tariffs to force trade concessions and encourage manufacturing in the US.
Trump has made tariffs a central part of his second-term economic agenda, arguing that import duties can protect American industries and address trade imbalances.
His latest move against Canada has also relied on an unusual legal provision.
The Trump administration invoked Section 338 of the Tariff Act of 1930 to threaten tariffs of up to 50 per cent on selected Canadian imports. The provision allows the president to impose tariffs on countries deemed to have discriminated against US businesses.
Section 338 has never previously been used to impose tariffs.
The law dates back to the period of the Great Depression. The 1930 tariff legislation is associated with the Smoot-Hawley tariffs, which economists and historians have long argued contributed to a contraction in global trade during the economic downturn.
Trump has turned to alternative legal authorities for tariffs after the US Supreme Court ruled in February that he had exceeded his authority in imposing a separate set of broad tariffs.
The administration is also renegotiating the United States-Mexico-Canada Agreement, or USMCA, which replaced NAFTA during Trump’s first term.
The threat of tariffs gives Washington additional leverage as it seeks new concessions from its North American neighbours.
Deal could have wider North American implications
The emerging US-Canada agreement could also have implications for Mexico, the third major economy in North America’s integrated trading system.
Mexico has been seeking its own agreement with the Trump administration and has made concessions, including moves related to China, as negotiations have continued.
A preferential deal for Canada could therefore increase pressure on Mexico to secure similar treatment before the broader North American trade framework is renegotiated.
For now, the biggest question is whether Trump and Carney can convert the political agreement into a formal arrangement before the three-day pause expires.
The proposed tariff reductions on steel, aluminium and automobile content could represent a meaningful improvement for Canada. But with final rates, exclusions and other provisions still being negotiated, the agreement remains fragile.
Trump has repeatedly shown that trade deals can change until the last moment. The next three days will determine whether the latest US-Canada truce becomes a lasting trade agreement or merely another pause in an increasingly contentious relationship.
(With inputs from agencies.)
