US-Canada tariffs Trump pauses 50% duties as trade deal nears

US-Canada tariffs were put on hold for three days after US President Donald Trump said Washington and Ottawa had reached a preliminary agreement to avoid new 50% duties on Canadian goods.

Trump announced the pause late on Tuesday, hours before the tariffs were due to take effect. He said the decision rested on the two countries having a “DEAL”, subject to finalising the necessary documents.

Canadian Prime Minister Mark Carney later said the two sides had made “substantial progress”, although significant work remained before they could complete an agreement.

Trump also suggested that the Keystone XL pipeline could be revived. Former US President Joe Biden cancelled the project in 2021 after years of opposition from Indigenous groups and environmental campaigners, but Trump did not provide details about how the project might return.

The announcement followed a telephone conversation between Trump and Carney on Tuesday, their second discussion of the week. The talks have followed weeks of intensive negotiations over trade and tariffs.

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Existing US tariffs on Canadian vehicles had emerged as one of the main obstacles, according to people familiar with the negotiations.

The proposed 50% duties would affect about $20 billion worth of Canadian imports. They would also apply regardless of whether the goods qualified for preferential treatment under the US-Mexico-Canada Agreement (USMCA), which has protected much of Canadian industry from earlier US tariffs.

Canadian businesses and trade experts have warned that wider tariffs could cause job losses and closures in sectors such as lumber, wine and dairy. They have also cautioned that the dispute could complicate broader negotiations over the USMCA.

“There are billions in goods per year” that could become vulnerable to tariffs, Canadian Chamber of Commerce chief executive Candace Laing said, warning that businesses had already delayed hiring, investment and expansion decisions.

Canada’s Minister responsible for US trade, Dominic LeBlanc, and chief trade negotiator Janice Charette have remained in Washington for negotiations.

The Canadian officials met US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick for nearly two hours on Monday.

Washington has raised several complaints during the talks, including Canada’s retaliatory tariffs, some provinces’ restrictions on US liquor and Canada’s dairy supply-management system.

The two sides have also discussed reducing US tariffs on Canadian vehicles under Section 232 from 25% to 15%. Further reductions could depend on the amount of US content in each vehicle, according to sources familiar with the talks.

However, the precise terms of the agreement Trump announced remain unclear.

A major dispute centres on how manufacturers should calculate the US content of vehicles to qualify for tariff deductions. Washington wants only US-produced content to count, while Canada has argued that Canadian and Mexican components should also qualify as North American content.

The US Commerce Department issued new rules on Tuesday requiring automakers exporting from Canada and Mexico to certify their current levels of US content for tariff deductions.

The rules reduce the certification process from twice a year to once annually. Automakers must nevertheless recertify vehicles’ US content by September 30 to qualify for deductions under the new annual cycle beginning December 1.

Canada has previously warned that it could introduce support measures for industries affected by the tariffs and potentially suspend bilateral trade negotiations if Washington imposed the new duties.

The three-day pause now gives both governments additional time to finalise the proposed agreement and resolve the remaining disputes.