U.S., Canada barrel toward 50% tariff as Trump deadline approaches

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Or sign-in if you have an account.The U.S. and Canada flags flutter next to the Blue Water Bridge border crossing in Point Edward, Ontario. Photo by GEOFF ROBINS/AFP via Getty ImagesCanada is racing to strike a deal with the Trump administration on Tuesday before a midnight deadline to avoid a 50 per cent tariff on billions of dollars worth of exports to the U.S.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountCanadian officials Janice Charette and Dominic LeBlanc held talks with U.S. counterparts through the weekend and on Monday in search of an agreement to remove the tariff threat. Canadian Prime Minister Mark Carney told reporters the negotiations were “intense” but gave no details.Carney and U.S. President Donald Trump spoke Monday afternoon, according to a spokesperson for the prime minister. Trump ultimately has the final say over whether to impose the duties.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againAt least one key hang-up remains. As of Monday afternoon, U.S. and Canadian officials couldn’t agree on how much to lower the duty on U.S. automotive imports, currently set at 25 per cent of the value excluding American-made components.U.S. officials said they would not go below a rate of 15 per cent — the baseline tariff the U.S. has on auto-exporting nations South Korea and Japan. Canada, with an automotive industry that’s tightly woven with states in the U.S. Midwest, continued to push for a lower rate, according to sources familiar with the matter.It’s the latest round of bargaining between two longtime allies that conducted nearly US$900 billion of trade in goods and services last year. Trump began his second term by putting tariffs on Canada and Mexico almost immediately and has repeatedly suggested he’d rather not have a North American free trade agreement at all. At one point, angry at the premier of Ontario, the U.S. president threatened to “permanently shut down the automobile manufacturing business in Canada.”In July — one day after Trump and Carney appeared together at the World Cup final in New Jersey — the president ramped up the pressure on Canada, signing a proclamation to trigger the never-before-used Section 338 of the Tariff Act of 1930.If officials fail to reach a deal by Tuesday night, and the White House doesn’t decide to delay, the new 50 per cent tariff would hit at 12:01 a.m. Washington time on Wednesday. It would apply to an estimated US$20 billion worth of U.S. imports from Canada, including hockey equipment, dairy products and liquor. That’s about five per cent of total Canadian shipments to its neighbour.The U.S. is “convinced that this is a game of chicken and they are convinced the Canadians are going to swerve,” said Barry Appleton, a trade lawyer who is co-director of the Center for International Law at New York Law School.Each side is pushing the other to ease tariffs and trade restrictions. The U.S. is urging certain Canadian provinces to walk back a ban on American-made wine and liquor that went into effect last year as retaliation for Trump’s tariffs. Other sticking points include Canada’s retaliatory duties on American automotive vehicles, quotas on dairy products and procurement rules.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Canada, in turn, is asking the U.S. to lower its industry-specific tariffs on aluminum, steel and vehicles. U.S. duties on Canadian lumber are also a problem.Political falloutAny new tariffs would exacerbate a diplomatic relationship between the U.S. and Canada already under strain. Trump has contributed to the fracturing since returning to the White House, including with last year’s comments about annexing Canada as the 51st state. The inflammatory rhetoric has resulted in a decline in Canadian travel to the U.S., including in border states and key tourism regions like Las Vegas.Canadian officials will face pressure from constituents to retaliate against the U.S. if the new tariffs go into effect.The U.S. liquor ban has been popular among Canadians, for example. A late-July survey by Nanos Research for Bloomberg News, taken after Trump issued the Section 338 tariff threat, found that 77 per cent of Canadians want provincial governments to keep the retail ban on U.S. booze. Only 18 per cent said it should go back on the shelves.The Canadian public is “reaching the end of its patience” with the Trump administration, said Eric Miller, founder and president of Rideau Potomac Strategy Group, a trade and economic consulting firm.One of Carney’s challenges will be getting the provinces on board with any trade truce. All of Canada’s auto assembly plants are located in Ontario, whose leader, Premier Doug Ford, has said he will not reverse his province’s alcohol ban unless the U.S. gives significant relief on tariffs.“Doug Ford has pretty much said that he’s not interested in just making concessions that aren’t going to help Ontario’s industrial base,” said Miller, who is a former adviser to the Canadian government on trade and economic issues.CUSMA uncertaintyAlso hanging over the talks is the fate of the Canada-U.S.-Mexico Agreement, which Trump negotiated during his first term. It’s due to expire in 2036 unless the three countries agree to extend it, and the US has made it clear it doesn’t like the current terms.A report for the Canadian American Business Council found that a breakdown in CUSMA would result in a US$1 trillion decrease in cumulative gross domestic product over 10 years in the U.S. For Canada, it would diminish cumulative GDP by $271 billion over that time period. A successful renegotiation, which clears up the uncertainty around investment, adds to economic output in both countries, said the report, which was done by Oxford Economics.US Trade Representative Jamieson Greer said late last week that Canada needs to scrap last year’s retaliatory trade measures to avoid the new tariffs.“Any potential resolution has to include all of these, or a pathway forward for them,” Greer said to reporters at the Iowa State Fair on Friday. Because Trump’s latest tariff threat is a response to Canadian retaliation, “those are things that would have to be resolved.”Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.