Trump halts 50% tariffs on Canada for three days, signals trade deal close
US President Donald Trump has paused the planned rollout of 50% tariffs on certain Canadian goods for three days, just hours before a midnight deadline. The move comes amid signs that the two countries are close to finalising a broader trade agreement after weeks of intense negotiations.
Trump announced the temporary reprieve on his Truth Social platform. "Based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!" he wrote. The message was typical of Trump's use of social media to make major announcements.
Canadian Prime Minister Mark Carney was more measured in his response. "Substantial progress has been made towards a comprehensive trade deal, but there is important work still to be done," he said. This cautious tone reflects the remaining hurdles.
The two countries have been engaged in intensive talks to revise the United States-Canada-Mexico Agreement (USMCA), the free trade pact Trump signed during his first term. Despite initially praising the deal, he has now said it requires significant changes to benefit American workers and businesses.
The US Trade Representative's office described the proposed pact on X (formerly Twitter) as set to "include comprehensive market access for all American goods, economic security commitments, digital trade alignment" and other provisions. These elements suggest a broad scope for the new agreement.
Trump's proclamation to suspend the duties stated that Canada "has expressed a commitment to remove the discriminations or unreasonable and unequal impositions at issue." This indicates that Canada has agreed to address the specific complaints raised by Washington.
From Carney's perspective, the prospective deal aims to "address outstanding trade issues and deliver greater certainty and real benefits for Canadian businesses, workers, farmers and families." Both leaders are trying to present the outcome as a win for their respective countries.
The background to these tariffs: Trump signed orders last month for 50% duties on select Canadian products, with the White House accusing Canada of "discriminatory treatment" against US alcohol, automobile, and dairy products. The tariffs would cover items like wine, hockey sticks, and cement.
According to Oxford Economics, the tariffs would affect about 5.5% of Canada's exports to the US, worth around $20 billion. The research firm described the overall economic risk to Canada as "modest" but warned that central Canada's manufacturing sector would be "much more severely" affected.
Canadian negotiators have been in Washington for weeks, seeking to avoid the new tariffs and to obtain relief from existing sector-specific duties on auto, steel, lumber, and aluminum. In exchange, Ottawa reportedly offered to press provinces to restore US alcohol and wine to their shelves—a move aimed at easing one of the flashpoints.
In his Truth Social post, Trump also raised the possibility of reviving the Keystone XL Pipeline, saying "The great Keystone XL Pipeline, long ago killed by Sleepy Joe Biden, may be awoken from the grave!" The project, fiercely opposed by environmental groups, was blocked under Trump's predecessor.
The timing of the pause is significant. "It's not unusual for a trade negotiation to go right up to the deadline," said Christopher Padilla, a former US commerce official. Padilla believes Trump's administration threatened new tariffs as a negotiating tactic to extract early concessions from Canada in the USMCA talks.
The three-day pause offers a window for the final documents to be prepared and signed. If no deal is reached, the tariffs could be reimposed. The uncertainty is likely to keep businesses on edge.
From a legal perspective, the new tariffs were imposed under a previously untested provision, after the US Supreme Court struck down many of Trump's global tariffs earlier this year. The duties are crafted to avoid energy, potash, and goods already facing sector-specific tariffs.
The broader context: Trump's trade envoy Jamieson Greer had previously said the tariffs aimed to "hold Canada accountable" for its retaliation, including off-shelf removal of US alcohol and efforts to give Canadian dairy better market access. The ongoing negotiations reflect the contentious nature of North American trade relations.
