Canada is making a last-ditch effort to reach a trade deal with the United States before the Trump administration imposes 50-percent tariffs on a broad range of Canadian exports beginning Wednesday. The threatened duties would cover about $20.2bn in goods, including electronics, industrial machinery, furniture, dairy products and wine.
The tariffs would apply even to goods that qualify for duty-free treatment under the United States-Mexico-Canada Agreement, potentially disrupting businesses across Canada if no agreement is reached before the deadline.
What the proposed tariffs would cover
The goods at risk represent about 5 percent of US imports from Canada, according to the Center for Strategic and International Studies. Trump has justified the measures by citing what his administration considers discriminatory treatment of US automobiles, dairy products and alcoholic drinks.
The threatened duties would be the first use of Section 338 of the Tariff Act of 1930. Existing exemptions under the North American trade agreement have allowed an estimated 85 percent of US-Canadian trade to remain tariff-free despite separate US tariffs on sectors such as automobiles and steel.
Related coverage: Canadian PM Carney and US President Trump Commit to Strengthen Trade Negotiations.
Why the negotiations are difficult
Prime Minister Mark Carney has described the talks as “delicate” and “intense” and has said he expects to speak with Trump before Wednesday. Canada must also secure support from its provinces for any agreement.
Provincial restrictions on US alcoholic beverages are a central issue. All but Alberta and Saskatchewan have blocked US alcohol sales since early last year in retaliation for US trade measures. Ontario Premier Doug Ford and some other provincial leaders have indicated they could lift those restrictions if Trump withdraws the tariffs, while other leaders have not committed to doing so.
Quebec Premier Christine Frechette has called the country’s supply-management system for dairy, eggs and poultry a non-negotiable issue for the province.
More context: New US Tariffs May Be Imposed as Existing Trade Duties Near Expiration.
Why the stakes are high for Canada
About 70 percent of Canadian exports go to the United States, whose economy is approximately 13 times larger than Canada’s. The United States sends about 30 percent of its exports to Canada, making the economic exposure unequal if negotiations fail.
McGill University trade expert Julian Karaguesian said 50-percent tariffs could price hundreds of Canadian goods out of the US market and affect businesses ranging from flower-bulb growers and beekeepers to hockey-equipment makers, cement companies, dairy producers and wineries.
Carney has not specified Canada’s response if talks fail, but has said the country is negotiating from a position of strength and has plans for any outcome. Consumer sentiment could also remain strained: a Nanos Research poll found that 69 percent of Canadians were unlikely to buy US-made alcoholic beverages even if they returned to store shelves.
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