Prime Minister Mark Carney spoke with U.S. President Donald Trump as Ottawa sought a last-minute deal to avoid new 50% tariffs set to take effect at midnight Wednesday, his office confirmed.
The Prime Minister's Office said the two leaders discussed ongoing trade negotiations by phone on Monday afternoon but provided no further details.
“We are negotiating. Negotiations are intense and sensitive. This is not the time to talk about negotiations in public,” Carney told reporters on Monday.
According to trade experts and industry officials, the new U.S. tariffs would cover approximately $20 billion in imports and apply regardless of whether Canadian goods qualify for preferential treatment under the U.S.-Mexico-Canada Agreement (USMCA), which previously shielded much of Canada's industry from earlier U.S. tariffs.
The White House and the Office of the U.S. Trade Representative did not immediately comment.
The two countries have sparred for decades over trade, often targeting sensitive issues such as Canadian softwood lumber imports and Canada's protected dairy market access. Still, they maintained a friendly relationship.
That changed during President Trump's second term as he used tariffs as a primary tool in his economic agenda, including bringing manufacturing back to the U.S.
Among the sticking points are the existing U.S. auto tariffs, according to two sources familiar with the talks speaking to Reuters.
The two sides have discussed reducing the Section 232 tariff on Canadian vehicles to 15% from 25%, with further reductions based on the level of U.S. content in each vehicle, the sources said.
However, disagreement remained over how to calculate content. Washington demands only U.S. production content be counted, while Canada wants all North American content, including Canadian and Mexican components.
With average auto profit margins at just 6%, even a 15% tariff would be too high, a Canadian auto official told Reuters, adding that about half the value of each vehicle made in Canada originates from the U.S., so tariffs would harm businesses on both sides.
Earlier Tuesday, the U.S. Commerce Department issued new rules for automakers exporting from Canada and Mexico, requiring them to certify current U.S. content levels to deduct tariffs, reducing the frequency from twice a year to once. However, the U.S. Federal Register notice stated that manufacturers must recertify U.S. content of vehicles before September 30 to qualify for deductions in the new annual cycle starting December 1.
Billions at Risk
Trade experts and industry officials said the new tariffs could lead to job losses and business closures in vulnerable sectors such as lumber, wine, and dairy. They also warned the dispute could complicate wider USMCA negotiations, which the U.S. declined to renew last month and are now under annual review.
“There are billions of dollars in goods each year that were previously unaffected, but now risk significant impact,” said Candace Laing, CEO of the Canadian Chamber of Commerce.
“Businesses have been operating under strain for over a year, delaying hiring, investment, and expansion in Canada,” she added.
On Monday, Canadian officials held nearly two-hour talks with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick.
Greer has repeatedly cited Canada's tariffs imposed after initial U.S. tariffs, some provinces' refusal to stock U.S. alcohol, and Canada's dairy supply management system among U.S. grievances.
