US pauses new Canada tariffs for three days as trade deal nears
US President Donald Trump has announced a three-day pause on new tariffs on Canadian goods, just hours before they were due to come into effect. The 50% tariffs, which were scheduled to apply to nearly $20bn (C$28bn) of Canadian imports, have been suspended to allow for the finalisation of a trade deal.
In a post on social media, Trump said: "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!"
The announcement came less than two hours before the deadline. The two countries have been at an impasse over several issues, including US tariffs on autos and bans on American liquor sales imposed by many Canadian provinces.
Trump and Canadian Prime Minister Mark Carney have held talks this week, and negotiators have been engaged in intense discussions since July, after Trump threatened the new levy with a deadline of 19 August.
In his post, Trump also said a final trade deal could allow the revival of the Keystone XL pipeline, which would connect Alberta to the US. The pipeline was blocked by previous US administrations. Environmentalists and indigenous groups have long opposed it, but Trump has repeatedly expressed support for the project, which would carry 830,000 barrels of oil per day.
The pause is a relief for Canadian negotiators and businesses on both sides of the border, who had warned that the new tariffs would be harmful to both economies.
Tensions between the two major trading partners have risen since Trump returned to office, as he has pursued a wide-ranging global tariff programme, upending decades of free trade between Canada and the US.
The two countries are each other's largest trading partners, with bilateral trade in goods and services exceeding $800bn annually. The uncertainty over tariffs has created significant concern among businesses and policymakers.
The proposed tariffs would have applied to a range of Canadian imports, including wine, dairy, cement, clothing, and hockey equipment. They would have been on top of existing US tariffs on Canadian steel, aluminium, autos, and lumber.
Canada has been seeking a deal that would see the US drop or reduce tariffs on these key sectors. The US, meanwhile, has demanded several concessions from Canada, including the removal of remaining retaliatory tariffs on American autos, adjustments to dairy quotas to allow greater access for US cheese producers, and the lifting of bans on US alcohol sales imposed by most Canadian provinces last year.
In the final hours before the deadline, negotiators discussed a deal that would reduce US tariffs on Canadian autos from 25% to 15%, according to a Reuters report citing anonymous sources. However, the two countries could not agree on which vehicles would be eligible, with the US pushing for the reduction to apply only to cars with a high amount of American-made content.
Carney will also need buy-in from provincial premiers to reinstate the sale of US alcohol, as liquor sales are controlled by the provinces, not the federal government. Ontario Premier Doug Ford, whose province is hardest hit by US tariffs on autos, said he was open to lifting the ban only if a "fair deal" is reached.
On Tuesday, the US Chamber of Commerce pushed for a deal, saying in a statement that "higher tariffs would damage both economies, drive up costs for US families, further disrupt critical supply chains, and risk the 13 million American jobs that depend on trade under the US-Mexico-Canada Trade Agreement".
The three-day pause provides a window for negotiators to finalise the details. However, the outstanding issues remain complex, and it is unclear whether a comprehensive agreement can be reached within the extended timeframe.
