Canada-US trade deal nears breakthrough under Carney

The Canada-US trade deal appears close to completion, but its final terms will determine whether Canada has secured a lasting economic advantage.

Prime Minister Mark Carney is already presenting the emerging arrangement as more than a temporary solution to another tariff crisis. His argument is that Canada entered negotiations with valuable access to the US market and is now working towards terms that could strengthen that position in important industries.

The breakthrough followed President Donald Trump’s temporary suspension of threatened 50 per cent tariffs on billions of dollars of Canadian goods. Officials on both sides have since expressed growing confidence that they can complete an agreement.

However, the full text remains unpublished. That leaves major questions over steel, aluminium, automobiles, lumber, dairy and other sectors. Until the final terms become public, it remains difficult to determine whether Canada has achieved a major win or simply secured a temporary pause.

Trump said the countries had reached a deal and delayed the threatened tariffs for three days while officials completed the documents. US Trade Representative Jamieson Greer also said American officials were confident an agreement had been reached and argued that it would strengthen North American manufacturing, energy production and supply chains.

Carney has taken a more cautious position, saying Canada is “moving towards an agreement”. Trade Minister Dominic LeBlanc has likewise indicated that officials are still working through the final wording.

That distinction matters because Canadian businesses need to know exactly what Ottawa secured and what it gave up. Even so, the change in tone represents a major improvement from only days earlier, when negotiations remained far apart.

Carney’s case for the Canada-US trade deal as a Canadian success rests partly on the country’s existing access to the American economy. Ottawa’s 2026 Spring Economic Update estimated that about 85 per cent of Canadian goods trade with the US was tariff-free, while the average US tariff on Canadian goods stood at roughly 5.2 per cent.

Canada therefore wants to preserve its preferential position while reducing the exceptional tariffs affecting industries such as automobiles and metals. Carney says the emerging agreement would “reinforce” Canada’s advantage.

The stakes are considerable. Statistics Canada reported that 71.7 per cent of Canadian merchandise exports went to the United States in 2025. Although Canada has diversified its trading relationships, losing privileged access to its largest market would still affect factories, farms, resource producers and communities across the country.

The treatment of steel and aluminium could become one of the agreement’s biggest tests. Both sectors have faced 50 per cent US tariffs, disrupting supply chains that have connected Canadian and American manufacturers for decades.

Reports on Wednesday suggested the proposed deal could reduce US tariffs on some Canadian steel and aluminium from 50 per cent to 25 per cent. Because the final agreement had not been published, the figure still required confirmation.

A reduction to 25 per cent would not restore tariff-free trade, but it would provide meaningful relief compared with the current rate. For mills, smelters and manufacturing communities, particularly in Ontario and Quebec, the real benefit will depend on whether the reductions are broad, permanent and practical.

The automotive industry could prove even more important. Carney has pointed out that some vehicle components cross the border as many as eight times before a finished vehicle reaches consumers.

Around 90 per cent of Canadian-built finished vehicles and about 60 per cent of Canadian auto parts go to the US. That makes tariff treatment crucial for manufacturers and suppliers, particularly in Ontario.

Before the latest progress, negotiators were considering a reduction in the US tariff on Canadian vehicles from 25 per cent to 15 per cent. A major disagreement centred on how much vehicle value could be excluded when calculating the tariff.

Washington wanted deductions based mainly on US-made content, while Canada sought wider recognition of North American content, including Canadian and Mexican components. Industry officials told Reuters that the broader approach could potentially bring effective tariffs on some North American vehicles into single digits.

Those details will matter greatly. A lower headline tariff will have limited value if the calculation rules still leave Canadian manufacturers facing high effective costs. The final arrangement could influence investment, production decisions and the future of vehicle programmes in Canadian factories.

Canada also avoided an immediate tariff shock involving roughly US$20 billion in imports. Trump had threatened new 50 per cent duties on Canadian products that would normally receive preferential treatment under CUSMA.

The proposed tariffs covered products including wine, dairy goods, cement and hockey equipment, while energy, potash, fish and some critical minerals were excluded.

That threat created particular concern among exporters because CUSMA had served as an important shield against many previous US tariffs. A sudden 50 per cent charge could have made shipments unprofitable for businesses heavily dependent on American customers.

The emerging Canada-US trade deal, however, will also require concessions from Ottawa. US officials say the package will include broader market access, economic-security commitments and digital-trade alignment.

Dairy remains especially sensitive because Canada’s supply-management system controls production and imports in sectors including dairy, poultry and eggs. Canada had already granted additional US dairy access under CUSMA.

LeBlanc said Wednesday that supply management had been preserved under the emerging agreement, although the final details were not yet available. Alcohol presents another challenge because provincial authorities play a major role in its distribution.

The bigger issue may be the future of CUSMA itself. The agreement, which took effect in 2020, provides the legal foundation for much of the tariff-free trade between Canada, the US and Mexico.

Canada says CUSMA supports millions of jobs across North America and remains in force until 2036. However, the US did not agree during the 2026 joint review to immediately extend it for another 16 years.

That does not mean CUSMA has ended. Instead, the agreement can face annual reviews until the three countries agree on an extension or reach its 2036 expiry date.

For businesses, that uncertainty can affect major investment decisions. Companies may delay factories, equipment purchases, hiring and long-term supply agreements when they cannot predict future trading costs.

The most valuable result of the Canada-US trade deal may therefore be greater certainty. The Bank of Canada has warned that tariffs and trade-policy uncertainty are weighing on business investment.

Canadian Manufacturers & Exporters welcomed the tariff pause but said uncertainty around the threatened 50 per cent duties and existing tariffs on automobiles, steel and aluminium continues to hurt businesses.

Carney will therefore need to deliver more than a short-term escape from the tariff deadline. A genuine Canadian victory would require clear rules, meaningful sectoral relief and lasting stability.

If the final agreement protects Canada’s preferential access to the US market while reducing major tariff pressures, Carney will have a strong case that Ottawa emerged from the confrontation in a stronger position.

Until the final text becomes public, however, that conclusion remains provisional.

Do you think the emerging Canada-US trade deal represents a genuine Canadian win or simply a temporary tariff truce?