US-Canada trade talks intensify as Trump readies 50% tariffs

The United States and Canada are scrambling to avert new tariffs on USD 20 billion in Canadian goods. The standoff could reshape USMCA talks and further strain a historically close alliance.Image used for representational purposes onlyThe United States and Canada are in intense talks to avoid a fresh trade clash, with President Donald Trump set to impose 50 per cent tariffs on USD 20 billion worth of Canadian goods from 12:01 am Wednesday. The planned duties would hit products ranging from hockey sticks to tongue depressors and would mark a sharp escalation in tensions between two countries that have long remained close allies and major trading partners despite repeated trade disputes.Trump's approach has strained a relationship that has usually been managed through cooperation even during disagreements over issues such as softwood lumber and access to Canada's protected dairy market. The two countries share an undefended 5,525-mile border, with nearly 330,000 people and USD 2 billion worth of goods crossing it every day, and about 800,000 Canadians living in the United States. Canadian soldiers also fought alongside Americans in Afghanistan after the 9/11 attacks.Public anger in Canada has grown over Trump's tariffs on Canadian goods and his repeated remarks about making Canada America's 51st state. A petition seeking the expulsion of US Ambassador Pete Hoekstra, a Trump ally, has gathered nearly 218,000 signatures since July 21. It accuses Hoekstra of having "normalised" Trump's talk of annexing Canada, among other things.As the deadline nears, both sides are trying to find a way out. "We are negotiating," Canadian Prime Minister Mark Carney told reporters on Monday, speaking in French. "The negotiations are very intense and delicate. This is not the time to talk about negotiations in public." The stakes are high for both countries. Nearly 72 per cent of Canadian goods exports last year went to the United States. At the same time, the Trump administration may be cautious about bringing in a major new tariff ahead of November's midterm elections, with American voters already unhappy about the high cost of living. "I don't think either side really wants these tariffs to come into effect," said Ryan Majerus, a partner at King & Spalding and a former US trade official. "There's a pretty strong push on both sides to find an off ramp here."Majerus said Washington wants Canada to buy more US military equipment, including F-35 fighters, join Trump's "Golden Dome" missile defence project, and give the United States more access to critical minerals so that it depends less on supplies from rival China. Canada, for its part, wants relief from US tariffs on steel and aluminium, as well as softwood lumber, which the United States says benefits from unfair government subsidies. Trump has made tariffs central to his second-term economic agenda. Last year, he imposed double-digit import taxes on almost every country, saying the long-running US trade deficit was a national emergency. In February, the Supreme Court ruled that he had exceeded his authority, struck down those tariffs and opened the way for the federal government to refund importers. Trump then turned to other tools. Last month, he imposed import taxes of 10 per cent to 12.5 per cent on 59 countries and the European Union, which together account for 99 per cent of US imports, alleging that they had failed to have or enforce restrictions on goods made with forced labour.He then invoked Section 338 of the Tariff Act of 1930 to target Canada, imposing 50 per cent tariffs on products that make up about 5 per cent of Canadian exports to the United States. The provision, part of the Smoot-Hawley tariff law that economists and historians link to a worsening of the Great Depression, has never been used before. Unlike Section 301 of the Trade Act of 1974, which US trade officials have usually preferred, Section 338 does not require an investigation and places no limit on how long the tariffs can remain. In announcing the move, Trump said Canada discriminates against US exports of cars, alcohol and cheese. He is also angry that Canada and China were the only countries to respond with retaliatory tariffs after he imposed levies on their goods last year. "If a country retaliates against us, we're obviously not going to tolerate that," US Trade Representative Jamieson Greer told reporters on Friday at the Iowa State Fair. "We'll take action. My sense is the Canadians, they want to have a more conciliatory approach, but we'll see."The dispute is also tied to the renegotiation of the US-Mexico-Canada Agreement, the North American trade pact Trump pushed through in his first term. The threat of Section 338 tariffs gives Washington more leverage in those talks. "From Carney's perspective, you need (USMCA) to be renegotiated," said Christopher Gundermann, a fellow in the economics programme at the Centre for Strategic and International Studies. "You can't renegotiate it with a massive trade war going on." But anger in Canada may limit how far Carney can go. Canada could retaliate again if the new tariffs take effect. Daniel Beland, a political science professor at McGill University in Montreal, said Canada's government "cannot look like it is simply caving to the Trump administration's demands". He added, "Making further concessions without getting something meaningful in exchange would probably lead to a strong backlash ... The risk is for the Carney government to make Canada look weak and, therefore, even more vulnerable to future trade and geopolitical bullying on the part of the Trump administration."Canada's minister for US trade, Dominic LeBlanc, met Greer on Monday but gave little away afterward. "The work is continuing," he said. "We continue to do our job." For now, both countries are still talking, with the focus on avoiding a new tariff fight that could further damage one of the world's closest trading relationships.With PTI Inputs- EndsPublished By: India Today Web Desk Published On: Aug 18, 2026 09:54 IST