Canada races against time and politics to dodge Trump tariffs

Trade negotiations between Canada and the U.S. have entered a critical final stretch as Canada tries every avenue to avoid the 50% tariff that President Donald Trump's administration has threatened to impose on a range of Canadian exports.

According to the Center for Strategic and International Studies (CSIS), without a last-minute deal, the U.S. will apply a 50% tariff starting Wednesday on many Canadian goods, including electronics, industrial machinery, furniture, dairy products, and wine. About $20.2 billion in goods would be affected, equivalent to 5% of total U.S. imports from Canada.

Trump has justified the move as a response to Ottawa's alleged discrimination against American cars, dairy products, and alcoholic beverages. Notably, this time the U.S. is invoking Section 338 of the Tariff Act of 1930 — the first time this provision has been used — and it also targets goods that currently enjoy 0% tariffs under the U.S.-Mexico-Canada Agreement (USMCA).

Earlier, although Trump had imposed tariffs on cars, steel, and other sectors, about 85% of U.S.-Canada trade remained tariff-free thanks to exemptions in the USMCA, an agreement signed during Trump's first term.

Julian Karaguesian, a lecturer and trade expert at McGill University in Montreal, warned: "A 50% tariff would make hundreds of Canadian products lose their competitive edge in the U.S. market. This would harm small, medium, and large businesses, as well as self-employed workers across the country, from tulip growers and beekeepers to makers of hockey sticks, cement, dairy, and wine."

Negotiations between officials of the two countries are taking place behind closed doors, but many signs suggest they are not easy. Canadian Prime Minister Mark Carney, who is expected to speak with Trump before the Wednesday deadline, described the talks as "delicate" and "tense." Earlier this month, Carney admitted the negotiations were "uncomfortable."

Ottawa's efforts are further complicated by the need to convince the provinces to support any deal. One of the issues that has frustrated Trump is the provincial-level ban on American alcohol sales. Except for Alberta and Saskatchewan, all 10 Canadian provinces have blocked U.S. alcohol sales since early last year in response to Washington's tariff measures.

Ontario Premier Doug Ford and several other provincial leaders have expressed willingness to lift restrictions if Trump abandons the tariffs, but the rest have not yet committed. Meanwhile, Quebec Premier Christine Frechette considers the supply management system — a mechanism that applies production and import quotas for milk, eggs, and poultry — a "non-negotiable" issue.

Canada is clearly losing more than the U.S. in this unequal trade war. About 70% of Canada's exports go to the U.S., an economy 13 times larger than Canada's. In contrast, the U.S. sends only 30% of its exports to Canada.

Ian Lee, a trade expert at Carleton University in Ottawa, noted that many see these disputes as stemming from emotions about injustice and lack of respect. Although Canada has more disadvantages, many citizens still do not want the government to yield to Trump. "Instead of focusing on the bigger goal of preserving access to the world's largest economy, Canadians don't want Carney's government to compromise even a little," Lee said.

Even if Carney reaches a deal and avoids a renewed trade war, Canadians may still boycott U.S. goods for some time. According to a Nanos Research poll last month, 69% of Canadians said they would not buy American-made alcoholic beverages even if they were back on shelves.

Anger at Trump's policies has also spread to Americans in general. An Angus Reid Institute survey earlier this month showed 48% of Canadians hold an unfavorable view of Americans, while 45% have a positive impression.

Carney has not revealed his response plan if negotiations fail but insists Canada is negotiating "from a position of strength." "I have a plan for every possible scenario," he told reporters.

Whatever the outcome, Ottawa is still expected to continue efforts to reduce its dependence on the U.S. in the long term. In September, Carney unveiled a new trade diversification strategy focusing on untapped markets in Asia and elsewhere, to cope with the "breakdown" of the global economy.

Saibal Ray, a supply chain management expert at McGill University, believes Ottawa has already begun efforts to diversify trade relations, which will help in the long run. "On measures that could truly pressure the U.S., restricting energy exports is probably one of the strongest options. But I'm not sure Ottawa would be willing to go that far, because the economic consequences for Canada would also be significant," he said.