Carney Walks a Political Tightrope as US Trade Talks Approach Deadline

(Bloomberg) — A year ago, after a meeting with Canada’s provincial leaders, Prime Minister Mark Carney made a pledge that he has since repeated many times.

“Canada will not accept a bad deal,” he said about trade negotiations with President Donald Trump’s administration.

That promise is being put to the test as never before. Canadian trade officials have spent days camped out in Washington as they try to reach a pact to avert a punishing array of new tariffs threatened by the White House.

Trump and his officials have demanded Carney act on a lengthy list of trade irritants or the US will move forward on Aug. 19 with 50% duties on about $20 billion worth of Canadian products, including milk, plywood, hockey sticks and beer.

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The two sides are in intensive talks over a preliminary deal to stave off the new taxes, according to people familiar with the matter, speaking on condition they not be identified as the negotiations continue.

The framework of a potential deal would see the US back away from the 50% tariffs and reduce certain Section 232 tariffs on Canada. The 232 levies are the ones Trump has put on foreign-made steel, aluminum, autos and lumber — all industries with integrated supply chains between the US and Canada.

In exchange, Canada would remove some of its retaliatory measures and make other concessions, such as returning US booze to store shelves and widening access to its dairy market, the people said.

One item under discussion would be lowering the US auto tariff, which is currently set for Canada and Mexico at 25% of the value of the non-US content, the people said. Trump’s previous deals with auto-exporting nations Japan and South Korea have cut the auto tariff to 15%.

Roughly half of the value of a typical Canadian-made vehicle is from US components. So a 15% headline rate may mean an effective 7.5% tariff, depending on the model. To get such a deal, Canada would have to roll back its retaliatory tariffs on US-manufactured cars and trucks.

The US and Canada are also discussing changing steel tariffs to exclude certain derivative products and potentially also lower the headline tariff rate, the people said.

Canada has accepted that it can’t get all US tariffs removed. But it wants the Section 232 tariffs set at 10% or lower, and the US is resisting that, one of the people said.

The situation remains fluid, and may produce an initial deal that wouldn’t settle all trade irritants but would open the door to further discussion, the people said. But any pact would need Trump’s blessing. The president had not yet been briefed on the talks as of Tuesday, a White House official said. US Trade Representative Jamieson Greer is leading US efforts, with the involvement of others including Commerce Secretary Howard Lutnick.

A US official, speaking on condition of anonymity, said the Trump administration is willing to discuss trade but is committed to the president’s policy of using tariffs and other measures to reshore manufacturing and reduce the trade deficit. The official declined to detail the ongoing talks.