OTTAWA — Canada-U.S. Trade Minister Dominic LeBlanc and chief trade negotiator Janice Charette have been in Washington, D.C., this week trying to secure a deal that would see the United States reduce its sectoral tariffs on steel, aluminum, autos and lumber, as well as abandon its plan to slap additional duties on some US$20 billion worth of goods next week. 

Even if they arrive at a deal negotiators on both sides can live with before time runs out at 12:01 a.m. EDT Wednesday, the notoriously unpredictable President Donald Trump must then decide whether to accept it.

“We might get very lucky,” said Jamie Tronnes, executive director of the Washington-based Center for North American Prosperity and Security. “We could also be looking at a point where the president just isn’t getting enough of a win, in his view, from Canada, and so no deal can be had. We just simply don’t know.”

The Logic spoke to several industry sources who have been briefed on the talks so far, which offer clues about the complexity of the discussions and, potentially, the shape of things to come. 

‘They’re all important’

The day after Trump announced new 50 per cent tariffs on a wide range of Canadian goods, Prime Minister Mark Carney said he and the president agreed to “intensify” trade negotiations. He also made clear that Canada was seeking a comprehensive, lasting deal that would address four sectors hit with Section 232 tariffs: steel, aluminum, autos and forestry products. “We don’t want a partial agreement. We want something that addresses those sectors as well, so that is a viable approach going forward,” Carney told reporters July 21.

“They’re not trying to pick winners and losers among the various industries,” Dennis Darby, CEO of the Canadian Manufacturers and Exporters, said in an interview. As a member of Carney’s Advisory Committee on Canada-U.S. Economic Relations, Darby has been briefed on the talks. “They’re all important to Canada,” he said. “They’re all important to the U.S.”

The booze ban

The ban on the sale of U.S. alcohol in several provinces is one of the reasons for the new 50 per cent tariffs under Section 338 of the Tariff Act of 1930. Greer had listed lifting the bans as one of the conditions for renewing the Canada-United States-Mexico Agreement (CUSMA). It has been a key demand in current talks, yet a concession that premiers will not grant easily. They were, after all, a response to Trump’s original tariffs that launched the trade war last year. Carney said last month that any decision to resume sales of U.S. alcohol would be up to the provinces that removed it from the shelves of their liquor stores—and that it would come as part of an overall deal. Ontario Premier Doug Ford, who has repeatedly urged Ottawa to go further, told reporters Thursday he would be “more than happy” to let U.S. booze back in exchange for a fair deal.

Jean Simard, president of the Aluminum Association of Canada, told The Logic that is why any relief from Section 232 tariffs needs to be significant. Simard, who is also on the advisory committee, said Canada’s negotiating team has told the U.S. that Ottawa cannot ask the provinces to move on the liquor ban, or protectionist procurement policies, without meaningful concessions on those levies. “Going in, the U.S. understands this,” Simard said. “There’s no way they can expect Canada to have domestic support if there’s not enough comfort provided.”

Comprehensive, not identical

Even though Canadian negotiators went into the talks insisting on addressing Section 232 tariffs on steel, aluminum, autos and lumber, Simard said negotiators are not expecting an across-the-board solution. “It’s going to be asymmetrical depending on each sector because they each have their own industrial footprint and pricing dynamics.” Discussions on dairy, another longtime irritant for Trump, are particularly technical. Simard and Darby both said the issue is not about Canada’s supply management system writ large, but how the quotas for how much U.S. producers can sell to Canada are allocated.

Another industry source, who spoke to The Logic on the condition of anonymity to discuss matters they were not authorized to talk about publicly, shared what they were told of Canada’s formal proposal on autos. The source said Canada offered to rescind its counter-tariffs on U.S. autos in exchange for reducing the current 25 per cent tariff to something lower than the 15 per cent rate that Japan and South Korea secured in their deals. That proposal, the source said, would also have the tariff apply only to the content of the vehicle that originated outside the U.S., Canada or Mexico. That would bring it more in line with CUSMA.

Save the date

Another key Canadian goal going into this round of negotiations, Simard said, was to get the U.S. to formally launch talks for the renewal of CUSMA, also known as the USMCA. Greer has held several rounds of bilateral talks with Mexico, but not Canada. On July 1, Greer said the Trump administration would not agree to extend the trilateral deal “in its current form,” but the U.S. could still decide to renew before it expires a decade from now.

Mind the ‘cliff’

According to a report in The Globe and Mail, Charette told Greer during a meeting last week that the Section 338 tariffs represent a “cliff”—that, by going ahead with them, the White House would jeopardize talks and ramp up demand from Canadians for further retaliation. Both Simard and Darby confirmed that Charette delivered such a warning. “Nothing holds anymore,” Simard said of the warning the Canadians gave to U.S. negotiators. “It’s going to be retaliation upon retaliation and it’s going to create a mess.” Darby said whatever language Charette used behind closed doors, her meaning was clear: If the U.S. implements the Section 338 tariffs, “We can’t even talk about anything else.”

While Canada wants to have a deal in front of Trump before the deadline, failure to do so does not necessarily mean the Section 338 tariffs go ahead and talks are off. Trump could agree, as he has done before, to delay implementation while the parties keep talking. That might be a relief, Darby said, but it is not a lasting solution. “That uncertainty itself is actually hurting.”