US halves Canadian steel, aluminum tariffs to seal trade deal

A tentative US-Canada trade pact halves tariffs on Canadian steel and aluminum while pausing $20 billion in new levies for three days.

The US will cut tariffs on Canadian steel and aluminum by half as part of a tentative trade agreement that paused $20 billion in new levies, easing a two-year standoff that had threatened to escalate into a full trade war between the neighbors.

"Substantial progress has been made, although there is important work still to be done," Prime Minister Mark Carney said in a statement Tuesday, striking a more cautious tone than President Donald Trump, who announced the pact on Truth Social less than two hours before the new levies were set to take effect.

The reduction applies to the 50 percent Section 232 tariffs on steel and aluminum that Washington imposed last year, with Canadian exports also facing quotas. Washington separately offered to cut auto tariffs from 25 percent to 15 percent while maintaining an exemption for American content, which makes up about half the value of a Canadian-made car. The three-day pause covers the 50 percent Section 338 levies on electronic equipment, dairy and alcohol that Trump threatened under the Smoot-Hawley Tariff Act of 1930.

The deal is an interim step before the more complicated trilateral renegotiation of the US-Mexico-Canada Agreement, which could stretch into next year. If the documents are not finalized within three days, the Section 338 levies on $20 billion of Canadian goods take effect — a scenario that Canada's chief negotiator Janice Charette warned would force Ottawa to stop negotiating and retaliate.

Concessions and flashpoints

In exchange for the tariff relief, Washington demanded a long list of concessions: Ottawa dropping its retaliatory tariffs on American autos, changing how licences are allocated under the dairy supply-management system, and instructing provinces to return US alcohol to store shelves and end Buy Canadian procurement policies. The US also pressed Canada to complete its long-delayed purchase of F-35 fighter jets from Lockheed Martin, grant Washington right of first refusal over critical minerals, and buy American-made radar planes as part of the planned Golden Dome missile defence system.

Autos proved the toughest issue, with Trump explicitly calling for all assembly to be reshored in his country. Washington wanted to align its auto deal with Canada to a parallel pact it is negotiating with Mexico, whose economy secretary Marcelo Ebrard was seen leaving US Trade Representative Jamieson Greer's office Tuesday evening. Forestry was another flashpoint: Washington insisted Ottawa settle for a separate Commerce Department review of softwood lumber tariffs, while Canada demanded an immediate reduction in the Section 232 levies.

What's at stake

The deal, if finalized, would mark the first de-escalation in a trade conflict that has weighed on both economies. Canadian oil exports were also under discussion, with Trump suggesting the pact might revive the Keystone XL pipeline, a project twice cancelled by previous presidents. South Bow Corp., spun off from TC Energy in 2024, has partly resurrected the idea with its proposed Prairie Connector pipeline, which would carry about 500,000 barrels of oil per day from Alberta to the US border.

Carney must now convince provinces and an angry public largely opposed to trade concessions that the agreement serves Canada's interests. Provincial co-operation is necessary for several demands to be met, yet two sources said provinces were not briefed Tuesday on the substance of the talks. The next three days will determine whether the tentative pact holds or the two economies slide back toward escalation.

This article is for informational purposes only and does not constitute investment advice.