There’s a growing sense in the business community and among trade experts that U.S. President Donald Trump is unlikely to remove all the tariffs he’s placed on Canadian goods.BRENDAN SMIALOWSKI/AFP/Getty Images
Two weeks into intensive trade negotiations with the United States, Canada remains publicly committed to the goal of getting all tariffs removed. Nevertheless, Ottawa is beginning to manage expectations.
Kirsten Hillman, Canada’s ambassador to Washington and lead trade negotiator, highlighted President Donald Trump’s unwavering fondness for tariffs in several media interviews this week.
Several business leaders and industry representatives, who’ve had conversations with Canada’s negotiating team, say they’ve been asked what level of tariffs they could live with. The Globe and Mail is not naming them so they could speak freely.
The details of the discussions between Ottawa and Washington, which kicked into high gear this month following a meeting between Mr. Trump and Prime Minister Mark Carney at the G7 summit, remain a tightly held secret. One business leader, who has consulted with the Canadian team, likened Mr. Carney’s approach to how investment bankers run M&A deals: only a handful of people have access to the terms, and secrecy is paramount.
But as negotiators sprint toward a self-imposed July 21 deadline, there’s a growing sense in the business community and among trade experts that Mr. Trump is unlikely to remove all the tariffs he’s placed on Canadian goods in recent months – no matter what Ottawa puts on the table.
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“Free trade is no longer free. It comes with a subscription cost, and the subscription cost is a tariff,” said Goldy Hyder, president and chief executive officer of the Business Council of Canada.
Mr. Trump has de-escalated his global trade war in recent months. He paused the “reciprocal tariffs” he placed on more than 50 countries (excluding Canada and Mexico) for three months, and introduced several important tariff carve-outs for Canadian and Mexican goods. Dozens of countries are now negotiating with the U.S. to secure a more permanent reprieve, with the July 9 “reciprocal tariff” deadline rapidly approaching.
Still, the President seems committed to tariffs at some level – both as leverage to extract nontrade concessions from other countries, such as higher spending on defence or border security, and as a permanent tool to raise tax revenue and cajole foreign companies to build factories in the U.S.
Indeed, more tariffs are already in the pipeline. The U.S. has launched investigations into lumber, copper, semiconductors and pharmaceuticals under Section 232 of the Trade Expansion Act, which could result in sectoral tariffs similar to those on steel, aluminum and autos.
“A short-term agreement that creates certainty around tariff levels and minimizes what those levels are ought to be a realistic landing zone, so long as such an agreement checks the box for some other key priorities,” Jake Colvin, president of the National Foreign Trade Council, which advocates for U.S. companies, said of the Canada-U.S. talks.
“But given President Trump’s strongly held belief in tariffs, it may be unrealistic to expect that tariffs will completely revert to what they were in 2024.″
A more realistic outcome in the near-term, observers say, could be a partial reduction in the existing Section 232 tariffs, alongside quotas that allow a certain amount of steel, aluminum and automobiles to enter the U.S. tariff-free or at a lower tariff level.
That would resemble the arrangement British Prime Minister Keir Starmer signed with the Trump administration last month, which lowered tariffs on some sectors and introduced quotas for cars and beef, but left a baseline 10-per-cent tariff in place.
British Prime Minister Keir Starmer and the Trump administration signed an arrangement that left a baseline 10-per-cent tariff in place.Kevin Lamarque/Reuters
“The Brits, depending on your perspective, fortunately or unfortunately, set the standard. Not only did they agree to quotas, but they agreed to tariffs within the quotas. And that makes negotiating against that a difficult position for other countries around the world,” said Daniel Ujczo, a trade lawyer with U.S. law firm Thompson Hine LLP.
He said that U.S. officials he has spoken with show a clear preference for some sort of quota system, which could vary by industry.
“When we’re looking at goods such as aluminum on which the U.S. is heavily reliant, it is reasonable to expect that the quota would be based on existing volumes plus some room to grow on,” Mr. Ujczo said. “I think automotive becomes a bit more challenging, given the administration’s views that it wants final assembly in the United States.”
Steel tariffs, meanwhile, are widely seen as the hardest nut for Canada to crack, given the strength of the U.S. steel lobby and the fact that the U.S. industry has capacity to ramp up production to meet domestic needs – unlike with aluminum.
Whether any of this would be acceptable to Canada remains to be seen.
“Our government believes that open and stable trade between Canada and the United States is deeply beneficial to both countries, and we are confident that we can reach a trade deal with the U.S. Administration within the 30-day period,” said Gabriel Brunet, a spokesperson for Dominic LeBlanc, the minister responsible for Canada-U.S. trade.
“To that end, Minister LeBlanc and Ambassador Hillman are in regular conversation with their U.S. counterparts to make Canada’s case for the removal of tariffs on Canadian goods. At the same time, we are focused on building here at home.”
Mr. Trump’s tariffs are a breach of U.S. obligations under the United States-Mexico-Canada Agreement, the free-trade deal that Mr. Trump himself negotiated during his first term in office. Agreeing to keep some levies in place could make it hard to proceed with USMCA renewal discussions, which are currently scheduled for 2026, said Meredith Lilly, professor of international economic policy at Carleton University and a former trade adviser to prime minister Stephen Harper.
Moreover, a hastily arranged deal could leave Canada exposed to the future whims of Mr. Trump.
Unlike a typical trade agreement, which is hashed out over years by hundreds of lawyers and bureaucrats agonizing over every detail, the kind of deal Mr. Trump signed with Britain in May is of questionable legality and could be hard to enforce.
Prime Minister Mark Carney says Canada is ready to enact new steel and aluminum counter measures against the U.S. if a trade deal is not finalized by July 21, the end of the 30-day negotiation period.
The Canadian Press
“In many ways that’s more of a framework for co-operation and negotiation, but I really doubt that it is a legally binding agreement,” Prof. Lilly said. “I almost think of it as a bit of a back-of-the-napkin type of document.”
The right place to deal with long-standing grievances, over things such as access to Canada’s supply managed dairy market, broadcast restrictions or auto content rules, is in the USMCA discussions, Prof. Lilly said.
At least one issue likely won’t be able to wait. Canada’s Digital Services Tax, which would see Ottawa collect billions in taxes from U.S. internet companies, comes into force next week.
“You can’t have the Canadian government collecting more than $2-billion American dollars from American companies and expect the relationship to improve in the short term,” said Mr. Colvin of the National Foreign Trade Council.
Ultimately, Ottawa is lacking leverage in the negotiations, experts said. Canada’s countertariffs don’t appear to be biting particularly hard, domestic opposition to tariffs in the U.S. is muted and, so far, U.S. economic data has been fairly robust, while inflation has remained in check.
Mr. Carney has been trying to strengthen his hand in real time. Since becoming Prime Minister, he has sought a deal with Mr. Trump that goes beyond trade to address common defence and security concerns.
The decision to ramp up military spending and discuss joint participation with the U.S. on Mr. Trump’s “Golden Dome” missile defence system appears to be designed to grease the wheels of a trade deal.
The same goes for Mr. Carney’s efforts to accelerate the development of Canada’s critical minerals resources. Right now the U.S. relies heavily on Chinese-controlled mines and processing facilities for a number of crucial inputs into its high-tech and defence industries. Mr. Carney is pitching Canada, with its robust store of minerals, as a safer alternative.
It’s unclear whether U.S. access to Canadian critical minerals would be formalized in some sort of agreement. The U.S. Department of Defence already invests in Canadian mines directly, and Canada has signed an agreement on critical minerals with the European Union that could be a template.
Finally, there are Canada’s efforts to close ranks with the Americans to prevent cheap Chinese imports from flooding North American markets. Canada matched U.S. tariffs on Chinese electric vehicles during the final months of Joe Biden’s presidency. More recently, it has slapped tariffs and quotas on Chinese steel, partly to protect the Canadian market and partly to address U.S. concerns about Chinese steel being routed through Canada.
“I want to emphasize you do not get a seat at the table for one of these deals without agreeing to take action against China,” Mr. Ujczo said.
Canada is making the right moves on all these fronts, said Christopher Sands, director of the Hopkins Center for Canadian Studies at Johns Hopkins University. And many of the things Canada is now doing to get in Mr. Trump’s good books – taking a more active role in Arctic defence, or speeding up critical mineral development, for instance – are things that Canada should have been doing anyway, he said.
But Mr. Carney and his team are ultimately playing defence in a game they don’t control.
“This is the way the President likes it, you keep guessing what he wants and coming up with more until he finally goes, ‘Yeah, okay,’” Mr. Sands said. “It’s like the cat playing with the mouse: Okay, I played with this mouse enough. I’ll let it go. Or I’ll eat it.”