Trump pauses tariffs on Canadian imports, Carney says key work remains

• US President Trump paused new 50% tariffs on Canadian goods after reaching a preliminary deal with Canada, though important work remains to finalise the agreement.
• The deal includes commitments on market access, economic security, digital trade, and addressing US concerns on dairy, alcohol, and vehicle tariffs.
• Tariffs risk job losses and business closures in Canada; talks continue amid disputes over tariff calculations and potential impacts on USMCA negotiations.

WASHINGTON/OTTAWA – United States President Donald Trump announced late on the night of Aug 18 he was putting a three-day pause on new 50 per cent tariffs set to go into effect on Canadian goods on Aug 19, saying the two countries had reached an agreement.

An hour later, Canadian Prime Minister Mark Carney said in a statement that “substantial progress has been made, although there is important work still to be done”.

The pause was “based on the fact that Canada and the USA, subject to the finalisation of documents, have a DEAL”, Trump said in a post on Truth Social.

Trump and Carney spoke on the afternoon of Aug 18, their second conversation this week, and their negotiators have been involved in weeks of intense, opaque talks.

“While we continue this work, Canada remains focused on building a stronger, more independent and more competitive economy at home,” Carney said in his statement.

US Trade Representative Jamieson Greer’s office said the deal will include “comprehensive market access for all American goods, economic security commitments, digital trade alignment”, and other provisions.

In a proclamation posted on the White House website, Trump said he had received Canada’s commitment to address US concerns related to duties on dairy products, alcoholic beverages and motor vehicles.

US officials provided no further details and the Canadian government did not confirm any contents of an agreement.

Existing US car tariffs had been a sticking point, two industry sources familiar with the talks said earlier.

The new US tariffs would have covered about US$20 billion (S$25 billion) worth of imports and applied regardless of whether Canadian goods qualify for preferential treatment under the US-Mexico-Canada Trade Agreement (USMCA), which has shielded much of Canadian industry from earlier US tariffs.

Trump added in his social media post that the Keystone XL Pipeline – a project cancelled by former president Joe Biden in 2021 after years of indigenous and environmental opposition – “may be awoken from the grave”, but did not provide details.

Trump has made tariffs a central pillar of his foreign and trade policies despite legal setbacks and criticism from some analysts.

Tariffs could have led to job losses, business closures

Trade experts and industry officials say new tariffs could lead to job losses and business closures in vulnerable sectors, including lumber, wine and dairy.

They also warn the dispute could complicate broader USMCA negotiations.

“There are billions in goods per year that were not impacted before, but now are at risk of being impacted significantly,” said Candace Laing, chief executive of the Canadian Chamber of Commerce.

“Business have been doing a high-wire act for well over a year, holding off on hiring, investment and growing in Canada.”

Canada’s minister responsible for US trade, Dominic LeBlanc, and chief trade negotiator Janice Charette have been in Washington since last week for talks.

On Aug 17, the Canadian officials met for nearly two hours with Greer and Commerce Secretary Howard Lutnick.

Greer has repeatedly cited Canada’s tariffs that followed initial US tariffs, some provinces’ refusal to stock US liquor and Canada’s dairy supply management system among US grievances.

In a statement late on Aug 18, the Distilled Spirits Council of the US applauded Trump’s announcement and called for “a negotiated solution that gets American spirits back on retail shelves in all Canadian provinces and returns the spirits sector to a zero-for-zero tariff framework”.

The sides have discussed cutting US Section 232 tariffs on Canadian vehicles to 15 per cent from 25 per cent, with further reductions based on the amount of US content in each vehicle, the sources said.

Counting tariff deductions

A major point of contention was how tariff deductions based on content should be calculated, with Washington demanding that only US-produced content be counted. Canada pushed for all North American content, including Canadian and Mexican parts, to be counted, the sources said.

Earlier on Aug 18, the US Commerce Department released new rules for carmakers exporting from Canada and Mexico to certify their current levels of US content for tariff deductions, reducing the complicated exercise to once per year from twice.

But the Federal Register notice said carmakers must re-certify vehicles’ American content by Sept 30 for them to claim deductions in the new annual cycle starting Dec 1.

A Canadian government source said last week that all options remained on the table if the new tariffs take effect, including government support for affected domestic industries and a possible suspension of bilateral trade talks, but the source expressed hope that the US was keen to reach a deal. REUTERS