U.S. and Canada Race to Avoid Major New Tariffs

The United States and Canada are rushing to reach a deal before a midnight deadline on Wednesday. President Trump has threatened to place a 50% tariff — a tax on imported goods — on about $20 billion worth of Canadian products. Items on the list range from hockey sticks to tongue depressors. Leaders from both countries say talks are happening, but time is running short.

Canada and the U.S. have long been close neighbors, allies, and trading partners. Canadian soldiers fought alongside Americans in Afghanistan after the September 11 attacks. Nearly 330,000 people and $2 billion worth of goods cross the shared border every single day. About 800,000 Canadians even live in the United States.

But things have gotten tense under President Trump. He has pushed tariffs on Canadian goods and repeatedly suggested that Canada should become America's 51st state. Many Canadians are angry about these comments, and a petition to remove the U.S. ambassador has gathered nearly 218,000 signatures. That ambassador, Pete Hoekstra, is accused of making Trump's talk of taking over Canada seem normal.

Canadian Prime Minister Mark Carney told reporters that talks are ongoing but sensitive. 'The negotiations are very intense and delicate. This is not the time to talk about negotiations in public,' he said. Canada's trade minister, Dominic LeBlanc, also met with U.S. trade officials on Monday. Afterward, he kept his comments short, saying only, 'The work is continuing.'

Tariffs work like this: when the U.S. puts a tariff on a product from another country, American companies that buy that product have to pay the extra tax. Those companies often raise their prices to cover the cost, meaning everyday shoppers end up paying more. Currently, most Canadian goods face a 10% tariff, though many are exempt because of an existing trade deal called the U.S.-Mexico-Canada Agreement, or USMCA.

Nearly 72% of everything Canada exports goes to the United States, making the U.S. extremely important to Canada's economy. At the same time, some experts think the Trump administration may not want huge new tariffs right before November's midterm elections. American voters are already frustrated with high prices for everyday items.

So what does each side want from these talks? The U.S. is pushing Canada to buy more American military equipment, like F-35 fighter jets, and to join Trump's 'Golden Dome' missile defense program. It also wants greater access to Canada's critical minerals — rare materials used in technology and defense — to reduce American dependence on China.

Canada wants relief from U.S. tariffs on steel, aluminum, and softwood lumber. The U.S. claims Canadian lumber gets unfair government support, which Canada disputes. These arguments over lumber have gone on for decades, making it one of the longest-running trade fights between the two countries.

To threaten these new 50% tariffs, Trump used a very old law called Section 338 of the Tariff Act of 1930, passed during the Great Depression. Those original tariffs, known as Smoot-Hawley, became famous for making the Depression even worse by limiting global trade. Section 338 has never been used before in U.S. history, and unlike other trade laws, it requires no investigation and has no time limit.

The situation puts Canadian Prime Minister Carney in a very tough spot. He needs to protect Canada's economy, but he also cannot appear to simply give in to every U.S. demand. 'Canada's government cannot look like it is simply caving to the Trump administration's demands,' said Daniel Béland, a political science professor at McGill University in Montreal. Making too many concessions without getting anything back could make Carney look weak.