Canada says trade deal with US is very close, more work needed

Canada and the United States appear to be on the verge of a trade agreement, with Canadian Trade Minister Dominic LeBlanc saying the two countries are “very close” after marathon negotiations in Washington. The talks, which lasted over three hours with US Trade Representative Jamieson Greer, are aimed at defusing a tariff standoff that has rattled North American commerce for months.

The proposed deal would reportedly halve US tariffs on Canadian steel and aluminum while also lowering duties on automobiles. That’s a meaningful climb-down from the 50% tariff on Canadian goods that Washington had been threatening, a levy that would have hit an estimated $20-30 billion worth of exports.

A three-day ceasefire

President Donald Trump added fuel to the optimism by announcing a three-day pause on tariffs that had originally been scheduled to take effect on August 19-20. He cited the potential for a deal and, in a somewhat unrelated flourish, referenced the revival of the Keystone XL pipeline as part of the broader bilateral agenda.

Prime Minister Mark Carney has also acknowledged what both sides are calling substantial progress.

Still, “very close” and “done” are different words for a reason. LeBlanc was careful to note that more work remains.

Whiskey diplomacy and provincial politics

In one of the more colorful subplots, Canadian provinces have been using alcohol as a bargaining chip. All provinces except Alberta and Saskatchewan agreed to return US liquor products to their store shelves, a goodwill gesture designed to demonstrate that Canada is willing to lower the temperature.

The liquor ban had been implemented as a retaliatory measure during the tariff escalation. Provincial leaders who agreed to restock the products framed it as pragmatism. Those who refused urged their residents to buy domestically produced alternatives instead.

Markets are already pricing in a deal

The Canadian dollar has responded to the negotiations by climbing to its highest level in nearly three months. The currency’s strength reflects a combination of trade optimism and rising oil prices, both of which benefit the Canadian economy directly.

The steel and aluminum sectors would see the most immediate relief from any deal. Canadian producers have been operating under a cloud of potential 50% duties. A deal that locks in lower rates would allow these industries to make capital expenditure decisions with some confidence for the first time in months.

The automotive sector is equally consequential. Cars and car parts move across the US-Canada border multiple times during the manufacturing process. Lowering automotive duties would benefit not just Canadian manufacturers but also American automakers who depend on cross-border production networks.

If the deal falls apart, a full 50% tariff on $20-30 billion worth of Canadian goods would amount to one of the largest trade barriers between the two countries in modern history. Trump’s three-day tariff pause creates a narrow window: if negotiations stall, the duties snap back into effect.