US, Canada in last-minute talks to avert 50% tariffs

The United States and Canada are locked in urgent negotiations on Tuesday to reach a trade deal before a 12:01 a.m. Wednesday deadline, after which President Donald Trump has threatened to impose 50% tariffs on $20 billion worth of Canadian products ranging from hockey sticks to cement to tongue depressors.apnews+1

Talks Enter Final Hours

Canadian Prime Minister Mark Carney spoke with Trump on Monday and described the trade negotiations as "very intense and delicate" as the clock ticks toward the August 19 deadline. Canadian negotiators remain in Washington, with both sides still apart on key issues including tariffs on steel, aluminum, autos, and lumber.cbc+3

According to the Associated Press, if no agreement is reached by midnight, the new duties — invoked by Trump on July 20 under Section 338 of the Tariff Act of 1930 — will take effect on a broad range of Canadian imports, including dairy products, wine, clothing, and building materials. The tariffs would apply even to goods that qualify as originating under the United States-Mexico-Canada Agreement, meaning existing duty-free treatment would not shield importers.wiley+1

Sticking Points and Stakes

Reuters reported last week that both sides want an agreement, with a Canadian government source saying talks were "progressing well". But Canada has signaled it is willing to "walk away" from negotiations if the terms do not include a substantial reduction in existing sectoral tariffs. The Americans, for their part, have made clear they will not sign a deal that removes all tariff levels on steel, aluminum, autos, and lumber.reuters+1

The Globe and Mail reported Tuesday that Ottawa has signaled it will retaliate if the tariffs take effect, threatening to escalate what has already been a bruising, year-and-a-half-long continental trade war.theglobeandmail

Background

The tariffs represent the latest escalation in a trade conflict that began in February 2025. The U.S. had already raised tariffs on Canadian goods from 25% to 35% effective August 1, and the new 50% duties would add yet another layer of costs for American importers and Canadian exporters alike. The Washington Post reported that the two countries were "inching closer" to a deal as of last week, with industry executives and trade specialists following the talks closely.finance.yahoo+2

Whether a deal materializes in the remaining hours before the deadline will determine whether the trade war between the two largest trading partners intensifies further or enters a period of détente.