OTTAWA — Canada and the United States are entering the critical final stage of trade negotiations, with the two countries still divided over automobiles, dairy, alcohol, metals and softwood lumber as a deadline for sweeping new U.S. tariffs approaches.
Despite intensive negotiations between senior Canadian and American officials in recent weeks, no agreement has been reached to prevent U.S. President Donald Trump’s threatened 50 per cent tariffs on hundreds of Canadian products. The new duties are scheduled to take effect Wednesday unless the two governments can reach a last-minute deal.
Canadian negotiators are seeking not only to prevent the new tariffs but also to obtain relief from existing U.S. duties affecting major Canadian industries. Washington, meanwhile, continues to press Canada for concessions in areas including automobiles, dairy and provincial restrictions on the sale of American alcoholic beverages.
The automobile industry remains one of the biggest sticking points. According to sources familiar with the negotiations, Washington has proposed reducing its existing 25 per cent automobile tariff to 12.5 per cent. Canadian negotiators reportedly consider that reduction insufficient, particularly given the highly integrated nature of the North American automobile industry.
The Trump administration has cited Canadian automotive trade policies among its reasons for threatening the new tariffs. Canadian labour representatives, however, argue that tariffs on Canadian vehicles and components also hurt American manufacturers because supply chains frequently cross the Canada-U.S. border.
Unifor national president Lana Payne has urged Ottawa not to make excessive concessions, warning that accepting significant auto tariffs as part of an agreement could create a precedent when the Canada-United States-Mexico Agreement, or CUSMA, is renegotiated.
Dairy is another difficult area. Trump has repeatedly criticized Canada’s supply-management system, under which specified quantities of American dairy products can enter Canada at low or zero tariffs before substantially higher duties apply beyond established quotas.
The United States argues that Canadian tariff-rate quotas, particularly for American cheese, are more restrictive than arrangements available to some other trading partners. Sources indicate that Washington expects movement from Canada on dairy as part of an overall agreement, although the details of any Canadian proposal remain unclear.
Any major concession would be politically sensitive, especially in Quebec and other provinces with significant dairy industries. Quebec Premier Christine Fréchette has described supply management as a red line, stressing that thousands of farms and jobs depend on the system.
Provincial restrictions on American alcohol have also emerged as an important obstacle. The federal government has reportedly asked provinces to be prepared to return U.S. alcoholic beverages to store shelves quickly if an agreement is reached.
Most provinces removed American alcohol from publicly controlled stores as part of Canada’s response to the trade dispute. Alberta and Saskatchewan, which have privatized alcohol retail systems, have resumed sales, while several other provinces continue their restrictions.
Ontario Premier Doug Ford has said his province is prepared to bring American products back once Canada obtains what he considers a fair agreement protecting important sectors such as steel, automobiles, forestry, agriculture and manufacturing. Quebec has taken a similar position, indicating that movement on American alcohol would depend partly on tariff relief for industries important to the province.
The federal government has also reportedly asked provinces and territories to prepare to remove retaliatory procurement measures favouring Canadian suppliers if a broader agreement is finalized.
Steel and aluminum remain major priorities for Ottawa. Canada is seeking reductions in existing U.S. tariffs affecting steel, aluminum and copper, which currently range from 10 to 50 per cent.
The federal government has introduced several measures to support Canadian industries affected by the trade dispute. These include a $1-billion Business Development Bank of Canada loan program intended to provide financing to companies facing tariff-related pressures.
Ottawa has also announced an additional $100-million program to help cover transportation costs for Canadian-made steel shipped domestically by rail or marine routes. Under the program, the government will cover half of eligible transportation expenses, with individual producers able to receive rebates of up to $50 million.
Softwood lumber presents another major challenge. Canada is seeking relief from U.S. duties on Canadian lumber, where the combined tariff rate has reached approximately 45 per cent. Washington, however, reportedly wants the long-running softwood lumber dispute handled separately from the broader negotiations.
The lumber dispute has persisted for decades through both Republican and Democratic administrations. The latest tariff threat could further affect Canadian forestry products including plywood, wooden doors, fixtures and other lumber-related goods, with British Columbia expected to face particularly significant consequences.
B.C. Premier David Eby has urged Ottawa to ensure lumber remains a priority, emphasizing the importance of forestry to the provincial economy. Canadian producers have warned that additional tariffs could make it increasingly difficult to remain competitive in the American market.
At the same time, the negotiations extend beyond traditional tariff disputes. The United States is seeking preferential access to Canadian critical minerals and is discussing broader arrangements involving energy and security.
Canada possesses significant deposits of minerals considered strategically important to the United States, including lithium, nickel, cobalt and copper. These resources are increasingly important for batteries, advanced manufacturing, defence technology and efforts to reduce North American dependence on Chinese supply chains.
Washington has been expanding investment in domestic critical-mineral and battery production as part of its industrial and national-security strategy. Access to Canadian resources could therefore become an important bargaining element in a broader economic and security agreement.
Defence procurement may also be part of the discussions. Canada has been reviewing its planned purchase of U.S.-made F-35 fighter aircraft since Prime Minister Mark Carney ordered a review in March 2025 amid growing diplomatic and trade tensions with Washington.
National Defence Minister David McGuinty recently confirmed that the F-35 purchase is being examined by Canada’s negotiating team, indicating that defence and trade considerations could increasingly overlap as the two governments search for a comprehensive agreement.
With the tariff deadline only days away, Ottawa faces the difficult task of securing meaningful relief for major Canadian industries while avoiding concessions that could create political and economic problems at home.
The negotiations have therefore become a balancing act involving federal and provincial interests, manufacturing and agricultural industries, energy and natural resources, defence procurement and the future of the broader Canada-U.S. economic relationship.
Unless a breakthrough is achieved, Canadian businesses could soon face another significant escalation in the trade dispute, with new 50 per cent U.S. tariffs potentially adding to duties already affecting some of Canada’s most important export industries.