Last-minute "deal struck"! Trump announces postponement of 50% tariff increase on Canada

The tense US-Canada trade relationship saw a last-minute turnaround.

According to a report by Xinhua News Agency, US President Trump announced on the evening of the 18th that he would postpone by three days the imposition of a 50% tariff on Canadian goods. The tariffs were originally scheduled to take effect on the 19th Eastern Time and involved about $20 billion worth of Canadian goods. This gives both sides more time for further negotiations.

Less than two hours before the tariffs were to take effect, Trump announced the decision through a post on the social media platform Truth Social. He stated, "Canada and the United States have reached an agreement, with the final document pending confirmation," and that the US would suspend the tariffs. The White House subsequently issued a notice stating that Canada had "committed to canceling" discriminatory restrictions on US automobiles, dairy, and alcoholic beverages. The Office of the US Trade Representative said the agreement covers "comprehensive market access for US goods, economic security commitments, and digital trade coordination," though no specific details were disclosed.

Following the news, the Canadian dollar strengthened sharply, rising to 1.3872 CAD per USD at one point. However, Canadian Prime Minister Carney was relatively cautious in his remarks and did not explicitly announce an agreement had been reached. "Substantial progress has been made, but important work remains to be done," Carney said in a statement.

According to Xinhua News Agency, this batch of tariffs was originally set to take effect on the 19th Eastern Time, involving about $20 billion worth of Canadian goods, including wine, hockey sticks, cement, beer, milk, and plywood, among hundreds of specific products.

Before the postponement was officially announced, Canada's Minister in charge of US-Canada trade, Dominic LeBlanc, held further communications with US Trade Representative Jamieson Greer and Secretary of Commerce Howard Lutnick. According to Bloomberg, Canada's chief trade negotiator Janice Charette and Dominic LeBlanc stayed in Washington during the negotiations, working over the weekend to push the agreement forward.

Previously, on the evening of the 18th, Carney had a phone conversation with Trump to negotiate avoiding the tariffs, after which the two sides’ working teams continued with technical level discussions.

The legal basis for the 50% tariff is Section 338 of the 1930 Smoot–Hawley Tariff Act. According to Xinhua News Agency, Trump signed several announcements on July 20 invoking this section to impose tariffs on certain goods imported from Canada, citing discriminatory restrictions by Canada on US businesses.

Bloomberg reported that key US complaints include: most Canadian provinces (including Ontario and Quebec) ban US alcoholic beverages from entering retail channels, cutting off an important market for US wine and spirits exporters; in addition, Canada implemented reciprocal tariffs on US-made cars and trucks in response to Trump’s previous auto tariffs, though a rebate mechanism was provided for carmakers with factories in Canada, such as Honda.

It is worth noting that this Section 338 tariff does not cover the most important resource commodities that the US imports from Canada, such as oil, potash, and minerals.

Although Trump used clear language, characterizing this outcome as a "reached agreement," key differences between the two sides on several core issues have not been resolved. According to Bloomberg, difficult points in previous negotiations, such as auto and lumber tariffs, were not addressed as being solved by either party.

Carney's statement deliberately left room for flexibility, emphasizing that Canada will continue striving to "build a stronger, more independent, and more competitive domestic economy," suggesting that negotiations are far from finalized.

The newly announced three-day delay has essentially opened a 30-day negotiation window designed to use time pressure to prompt Canada to make concessions. Carney stated previously that Canada’s goal in trade talks is to reduce targeted tariffs in steel, aluminum, and car sectors, which have created serious uncertainty for its manufacturing base and led to layoffs in many regions.

In the same post announcing the tariff delay, Trump also stated that the Keystone XL pipeline project would resume, adding a new topic to bilateral relations.

According to Bloomberg, the US imports more than four million barrels of crude oil and petroleum products from Canada daily, a figure that has grown steadily for decades; energy is the largest category of US imports from Canada.

This progress also potentially boosts ongoing reviews of the North American free trade agreement—which also covers Mexico. Last year, bilateral trade between the US and Canada reached nearly $900 billion. The recent tariff dispute brought the two long-time allies’ relationship to a new low, but the last-minute preliminary deal is at least providing space to cool tensions.