Final Sprint in US-Canada Trade Negotiations, Canadian Media Reports Agreement Proposes Steel Quotas and Tariffs Reduced to 25% Within Quotas

The US-Canada trade negotiations have entered the final sprint, with key details of a potential agreement coming to light.

On Friday, August 21 local time, Canadian media The Globe and Mail, citing three informed sources, reported that the trade agreement being negotiated by the Canadian and US governments proposes to establish a tariff-rate quota (TRQ) system for Canadian steel exports: within a quota of 4 million tons of steel exported to the US per year, a 25% tariff will apply, while steel exports exceeding this quota will continue to face a 50% tariff.

This means that Canadian steel exporters may obtain partial tariff reductions, but the extent is lower than what Canada previously sought. In exchange, Canada has agreed to cancel all retaliatory tariffs on US steel and to further limit steel imports from third countries. Meanwhile, both sides are still negotiating the detailed arrangements for industries such as aluminum, automobiles, and lumber, with final terms yet to be concluded.

4 Million Tons Quota for a 25% Tariff Rate

The Globe and Mail reported that a steel industry executive revealed that the Canadian government has already agreed to this tariff-rate quota plan for steel, allowing approximately 4 million tons of Canadian steel per year to enter the US market at a lower 25% tariff.

Once the 4 million ton quota is used up, subsequent steel exports will still be subject to the 50% tariff—that is, the industry tariff level the Trump administration imposed on Canadian steel under Section 232 of the Trade Expansion Act.

Two other industry figures familiar with the negotiations also confirmed that Ottawa and Washington have reached consensus on the 25% tariff level within the quota.

If finalized, this means Canadian steel exporters can enjoy a 25 percentage point tariff cut for at least the 4 million ton quota.

But The Globe and Mail also highlights that US-Canada negotiations are ongoing, and related arrangements are still subject to change.

For Canada's steel industry, long under pressure from Trump-era tariffs, this plan provides some buffer but does not fully resolve the tariff problem—25% must still be paid within the quota, while anything above will continue to face the high 50% tariff.

Higher Than the 10%-15% Previously Envisioned by Canada

Although the 25% in-quota tariff is lower than the current 50%, it is still higher than Canada's previous expectations.

The Globe and Mail notes that last autumn the two sides discussed providing tariff relief for Canada's steel sector. At the time, industry sources said the tariff-rate quota plan being considered could have entailed only a 10%-15% in-quota tariff.

If this round sets it at 25%, the tariff relief for Canada's steel industry will be clearly less than initially envisioned.

More importantly, Canada will also have to offer additional concessions.

According to reports, Ottawa has already agreed to cancel all retaliatory tariffs imposed on US steel and to further restrict steel imports from third countries.

In other words, the US is not unilaterally lowering tariffs; rather, it is exchanging partial lower tariffs on Canadian steel for further restrictions on steel imports and the cancellation of retaliatory tariffs by Canada, among other policy concessions.

Progress on Autos, but Not All Canadian Demands Met

Automobiles are another core area in these negotiations.

The Globe and Mail reported that Ottawa also appears to have accepted the US position on auto tariffs. Previously the media said the US had agreed to reduce tariffs on Canadian automobiles from 25% to 15%, but Canada’s push for a broader “North American content” exemption was not fully granted.

Specifically, the US agreed only to provide tariff exemptions for US-origin content in vehicles, not for the Canada-sought content covering the entire North American supply chain.

Thus, while Canadian automobiles will face a lower nominal tariff, the actual effective rate may still be significantly higher than the surface rate of 15%.

The Globe and Mail cited several automotive industry experts estimating that with the exemption for US content, the average effective tariff rate for Canadian vehicles may be around 7.5%.

Industry experts believe this level is still too high to ensure the long-term competitiveness of Canada’s automotive sector.

Aluminum, Lumber, and Furniture Still in Discussion

Besides steel and vehicles, Canada is also seeking US tariff reductions for its aluminum products.

The Globe and Mail reported that both sides are currently negotiating aluminum trade arrangements, aiming to lower tariffs.

However, the prospects for the lumber and furniture industries receiving tariff relief are still highly uncertain.

Canada is pushing for the US to lower tariffs on Canadian lumber and furniture, but as of Thursday, the US remained cautious about including lumber in the current trade deal.

This means that as of now, steel and automobiles are the two key industries for which there already appear to be clear solutions under negotiation, while final arrangements for aluminum, lumber, and furniture remain to be seen.

Deadline Approaching, Trump Threatens Additional 50%

The reason for the last-stage negotiations is directly tied to the latest US-imposed deadline.

On Friday local time, Canada’s Minister in charge of US-Canada trade affairs, Dominic LeBlanc, and chief negotiator Janice Charette will continue consultations in Washington with US trade representative Katherine Tai. The Globe and Mail says this meeting is just hours before the latest agreement deadline.

Previously, US President Trump threatened that if the US and Canada fail to reach an agreement before 12:01 AM EST on Saturday, the US will impose a 50% tariff on an additional $20 billion of Canadian goods.

Earlier this week, Trump temporarily delayed the 50% tariff measures against some Canadian products for three days, buying time for the two sides to finalize a deal. Previously, the US had intended these measures to take effect even earlier.

LeBlanc, responsible for Canada’s US trade affairs, said Thursday that both sides are “very close” to an agreement.

Therefore, Friday’s negotiations are likely to become the critical window for both sides to finalize a deal before the deadline.

Earlier This Week, Media Reported US Planned to Cut Tariffs on Steel, Aluminum, and Autos

In fact, the steel plan reported by The Globe and Mail aligns with signals previously released by the media earlier this week.

The Wall Street Journal reported this week that the US was considering lowering tariffs on Canadian steel and aluminum from the current 50% to 25%, and auto tariffs from 25% to 15%. However, at that time, the reports cautioned that the deal was not final, and details could still change.

The 4 million ton steel TRQ plan further disclosed by The Globe and Mail on Friday provides a more specific implementation framework for the previously broad notion of “lowering to 25%”:

Not all Canadian steel will directly enjoy the 25% tariff; instead, up to 4 million tons annually will qualify for 25%, with the excess still subject to 50%.

This means the Canadian steel industry is not getting a full-scale tariff cut, but rather a tariff relief window with a clear quantitative ceiling.

Trudeau Government Faces Domestic Pressure

At the same time, the series of concessions in the potential agreement is bringing domestic political pressure on Prime Minister Trudeau.

In exchange for the US lowering some industry tariffs, Canada needs to address multiple US trade requests, including restoring sales of American alcoholic products in Canadian provinces, lifting some government procurement restrictions for US companies, and removing retaliatory tariffs on US cars.

The US is also asking Canada to make further arrangements on dairy, critical minerals, military procurement, and energy exports.

The Globe and Mail points out that as a condition for lower tariffs, Trudeau has already asked provincial governments to resume procurement and restore retail sales channels for US alcoholic products, while lifting procurement restrictions for US companies.

The US has also requested that Canada grant US companies priority in procuring Canadian critical minerals, complete the F-35 fighter purchase, buy US military equipment when joining the US “Iron Dome” missile defense system, and increase oil exports to the US.

Thus, this potential agreement is not simply a case of “the US lowers tariffs, and Canada does too”—instead, it is about Canada exchanging a series of market access, procurement, and supply chain concessions for limited reductions in US tariffs on some sectors.

“Accept High Tariffs” or Keep Fighting?

The final content of the agreement has already sparked debate within Canada.

Manitoba Premier Wab Kinew believes that if Canada accepts the long-term existence of Trump-era tariffs now, it may weaken Canada’s leverage when the USMCA is reviewed later this year or early next year.

“If we keep pushing, I think we might get more,” Kinew previously stated.

Conservative leader Pierre Poilievre has also publicly urged Trudeau not to accept an “unfair agreement,” warning that unilateral tariffs could place Canadian businesses at a competitive disadvantage.

For the Trudeau government, the real challenge is that if the currently revealed plan is ultimately accepted, Canada’s steel industry would be able to escape the full pressure of a 50% tariff but would still have to accept a tariff structure of 25% inside the quota and 50% outside; the effective tariff for the auto sector may also hover around 7.5%.

In exchange, Canada would need to make concessions in several areas including retaliatory tariffs on steel, third-country steel imports, US alcoholic products, dairy, critical minerals, military procurement, and energy exports.

As the deadline approaches, the US-Canada talks have entered a decisive stage. Whether the 4 million ton steel quota and the 25% in-quota rate can ultimately be written into the agreement, how the 15% auto tariff and US content exemption will be implemented, and whether industries such as aluminum and lumber can gain further relief will be the key issues in the final hours of negotiations.