The United States and Canada are closing in on a tentative trade agreement that would reduce tariffs on some Canadian steel and aluminium exports to 25 per cent and lower duties on Canadian automobile exports to 15 per cent, according to people familiar with the negotiations.
The proposed terms are still being worked out and would not necessarily apply to all Canadian exports in the affected sectors.
For steel and aluminium, certain derivative products containing the metals could remain subject to different tariff rates, the sources said. Meanwhile, the proposed auto tariff reduction would apply to the non-US content of vehicles exported from Canada, bringing the rate down from 25 per cent to 15 per cent.
Negotiators from both countries continued discussions on Wednesday, less than a day after US President Donald Trump agreed to pause planned 50 per cent tariffs on billions of dollars worth of Canadian goods to give the two sides additional time to reach an agreement.
The proposed tariff reductions could help the countries reach a broader deal before a Friday deadline and prevent the introduction of wider duties.
Trump indicated on Wednesday that his administration was considering lowering tariffs on Canadian metals.
“We’re looking at that,” Trump said when asked whether he would reduce the duties.
“We may bring some of the tariffs down to a level where other countries are because Canada was paying a higher tariff,” he added.
The possible agreement would provide Canada with relief from some of the existing tariffs that have become a major source of tension between the two countries.
The proposed steel and aluminium arrangement would effectively halve the current 50 per cent US tariff on those imports. Negotiators are also discussing possible exemptions and other changes that could determine which products would qualify for the lower rate.
The US is similarly considering cutting the tariff on the non-US portion of Canadian-made vehicles from 25 per cent to 15 per cent.
Canadian Prime Minister Mark Carney said in a social media post on Wednesday that discussions were moving towards an agreement that would secure “the best terms in each of Canada’s most important strategic sectors.”
His comment appeared to reference preferential tariff rates previously negotiated with other countries, including a 25 per cent rate on British steel and 15 per cent auto tariffs involving Japan and South Korea.
However, the emerging agreement could create political difficulties for Carney at home if Canadians view the deal as accepting tariffs that remain substantially higher than the historically low rates applied between the two economies.
Canada would receive preferential treatment compared with some other trading partners, while simultaneously accepting duties that remain significant despite the close economic integration between the US and Canada.
The possible agreement could also put additional pressure on Mexico, the third major member of the North American trading relationship, which has made concessions in an effort to secure a separate agreement with the Trump administration.
A White House official cautioned on Wednesday that negotiations with Canada had not yet been completed and that reports about specific terms should be treated as speculation until the administration formally announces an agreement.
Another unresolved issue involves Canadian provincial restrictions on US wine and spirits.
Carney reportedly urged provincial leaders to lift a partial ban on American alcoholic beverages, according to Nova Scotia Premier Tim Houston. The White House considers ending those restrictions an important component of any final agreement.
If the provinces refuse to reverse the measures, the emerging trade deal could face further complications.
Financial markets reacted positively to signs of progress. The Canadian dollar strengthened to C$1.3809 per US dollar shortly after 7pm New York time, its strongest level since June 1.
Shares of Canadian steelmaker Algoma Steel Group rose 16.6 per cent in Toronto. In the US, however, Nucor fell 5.9 per cent and Century Aluminium declined 4.6 per cent.
Trump also acknowledged that the US was making concessions as negotiations continued.
“Got to give something, and we’re doing certain things. We’re paying a high number. We’re reducing it a little bit,” he told reporters.
“It’s good for everybody, but our farmers are going to be thrilled. Our manufacturers are going to be thrilled,” he added.
Trump announced late Tuesday that implementation of the planned tariffs on Canadian goods would be delayed for three days after both countries reported progress towards an agreement.
The US and Canada conducted roughly $900 billion in goods and services trade last year, but relations have become increasingly strained since Trump returned to office and intensified pressure on Canada over trade.
The Trump administration imposed 50 per cent tariffs on Canadian steel and aluminium last year under Section 232 of the Trade Expansion Act. The measures have prompted several US trading partners to negotiate separate arrangements with Washington to limit sector-specific tariffs in return for trade concessions.
Canada has made reducing tariffs on steel and automobiles a priority in the current negotiations. The country is also the largest source of aluminium imports into the US, while American domestic production is insufficient to meet demand.
As a result, much of the cost of the aluminium tariffs has been passed on to US consumers and businesses.
However, some US manufacturing groups are pushing the Trump administration not to apply any lower tariff rate universally across Canadian steel and aluminium products.
The Coalition for a Prosperous America and other industry groups have urged the administration to maintain 50 per cent tariffs on derivative aluminium products even if tariffs on primary aluminium are reduced, arguing that the measure would provide greater protection for US manufacturers.
