Canadian Prime Minister Mark Carney and U.S. President Donald Trump held their second phone conversation this week on Tuesday, Carney's office confirmed, as Ottawa scrambles to broker a last-minute deal before new American tariffs on Canadian goods take effect at midnight Wednesday.
"Prime Minister Carney and President Trump spoke again this afternoon about the ongoing negotiations," a statement from Carney's office said, without offering specifics. The call followed an earlier conversation on Monday, the details of which were also kept under wraps. "We are negotiating," Carney told reporters Monday. "The negotiations are very intense and delicate. This is not the time to talk about negotiations in public."
The new U.S. tariffs would hit roughly $20 billion worth of Canadian imports, applying even to goods that qualify for preferential treatment under the US-Mexico-Canada Agreement (USMCA), which has shielded many Canadian industries from previous U.S. duties. The White House and the Office of the U.S. Trade Representative did not immediately respond to requests for comment.
The two nations have wrangled for decades over trade disputes involving Canadian softwood lumber and U.S. access to Canada's protected dairy market, yet managed to keep relations friendly. That dynamic has shifted during Trump's second term, as he has deployed tariffs as a central tool of his economic agenda to revive U.S. manufacturing.
A major sticking point remains existing U.S. auto tariffs, according to two unnamed sources cited by Reuters. Negotiators have discussed reducing Section 232 tariffs on Canadian-made vehicles to 15 percent from 25 percent, with further cuts linked to U.S. content in each vehicle. But the sides are split on how to calculate content: Washington wants only U.S.-produced content counted, while Canada argues for including all North American content, encompassing Canadian and Mexican parts. With automotive profit margins averaging just 6 percent, a Canadian auto official told Reuters that even a 15 percent tariff would be prohibitive, especially since roughly half the value of Canadian-built vehicles originates in the U.S., meaning tariffs would harm businesses on both sides of the border.
Earlier Tuesday, the U.S. Commerce Department released new rules for automakers exporting from Canada and Mexico to certify their current levels of U.S. content for tariff deductions, reducing the process to once per year from twice. However, the Federal Register notice said automakers must re-certify by September 30 to claim deductions in the new annual cycle starting December 1.
Trade experts and industry officials warn the new tariffs could lead to job losses and business closures in vulnerable sectors such as lumber, wine, and dairy, and could complicate broader negotiations over the USMCA, which the U.S. last month refused to renew and is now under annual review. "There are billions in goods per year that were not impacted before, but now are at risk of being impacted significantly," said Candace Laing, CEO of the Canadian Chamber of Commerce. "Businesses have been doing a high-wire act for well over a year, holding off on hiring, investment and growing in Canada."
On Monday, Canadian officials met for nearly two hours with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick. Greer has repeatedly cited Canada's retaliatory tariffs, some provinces' refusal to stock U.S. liquor, and Canada's dairy supply management system among U.S. grievances.