Canada races to finalize trade deal with Trump administration to avoid 50% tariff

The clock is ticking for Canada. With 50% tariffs on a broad swath of Canadian exports set to kick in on August 19, Ottawa is scrambling to reach an agreement with the Trump administration before the deadline.

The tariffs, announced on July 20, would hit goods valued at nearly $20 billion annually.

What’s on the chopping block

The list of targeted Canadian exports includes dairy products, automobiles, alcohol, and a range of consumer goods.

The Trump administration invoked Section 338 of the Tariff Act of 1930, a rarely used provision that allows the president to impose retaliatory duties when a foreign country is found to discriminate against US commerce.

The US argument centers on what it calls discriminatory Canadian trade practices across multiple sectors. Washington contends that Canada has systematically disadvantaged American exporters, particularly in dairy and auto markets, even while operating under the framework of the USMCA.

The tariffs apply even to goods that are fully compliant with USMCA rules.

The negotiating table

Canadian Trade Minister Dominic LeBlanc and US Trade Representative Jamieson Greer are leading talks aimed at defusing the situation before the August 19 deadline.

Canada has already put concessions on the table. Prime Minister Mark Carney’s government has proposed repealing retaliatory tariffs that Ottawa previously slapped on US-made vehicles, a move designed to address one of Washington’s core grievances in the auto sector.

Canada’s supply management system for dairy, which tightly controls production and imports, has been a persistent irritant for US producers who want greater access to the Canadian market.

Canadian unions have pushed back, arguing that the Carney government should hold a firmer line rather than making additional concessions to Washington.

The bigger picture: USMCA in limbo

The three signatory countries—the US, Canada, and Mexico—were supposed to hit a key milestone by July 1, 2026, to extend the USMCA. They missed it.

Canada sends roughly three-quarters of its exports to the US, making the bilateral trade relationship existential in a way that few other international partnerships are.

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