Prime Minister Mark Carney greets President Donald Trump during the official welcome of the G7 Summit in June in Kananaskis, Alta.Mark Schiefelbein/The Associated Press
Prime Minister Mark Carney and U.S. President Donald Trump spoke by phone Thursday – the first direct conversation between the two leaders in months and the first high-profile contact between Ottawa and Washington since they failed to reach a trade agreement three weeks ago.
The Canadian side said the talk was productive and wide-ranging, touching on trade, security and Ukraine. The leaders last spoke in late June, after meeting at the G7 conference in Kananaskis, Alta.
There have been few updates on the trade front since the two countries blew past Mr. Trump’s Aug. 1 deadline without reaching any agreement to address tariffs and other trade irritants.
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Despite a flurry of visits to Washington by Canadian trade negotiators ahead of the deadline, no deal emerged. Instead, Mr. Trump increased the blanket tariffs on Canadian goods to 35 per cent from 25 per cent, while maintaining a crucial carve-out for products that comply with continental free-trade agreement rules.
“The leaders discussed current trade challenges, opportunities, and shared priorities in a new economic and security relationship between Canada and the U.S.,” said a summary of Thursday’s call released by the Prime Minister’s Office.
“The leaders also discussed how to build on the President’s leadership to support long-term peace and security for Ukraine and Europe. The leaders agreed to reconvene shortly.”
A Canadian source familiar with the conversation said Mr. Carney initiated it. The source described the call as lengthy and substantive, but declined to elaborate further. The Globe and Mail is not identifying the source because they were not authorized to comment publicly.
The call is the first public signal that both sides remain engaged in trade talks. However, the scope of the discussions remains unclear.
For months after becoming Prime Minister, Mr. Carney said Canada would only accept a trade deal with the United States that removed all tariffs. That included the blanket tariff – ostensibly imposed to push Canada to address fentanyl trafficking – and the sectoral tariffs (known as Section 232 tariffs) applied to steel, aluminum, automobiles and more recently copper.
Last month, however, he acknowledged that Canada was unlikely to achieve the full removal of tariffs.
He said he reached this conclusion after seeing the agreements Mr. Trump struck with other large trading partners and allies, including the European Union, Japan and South Korea, which all left a baseline 15-per-cent tariff in place as well as sectoral tariffs, with some carve-outs.
Since attempts to attain some sort of comprehensive agreement flamed out last month, the Canadian negotiating team has remained in contact with their U.S. counterparts, but the level of engagement has dropped significantly.
Dominic LeBlanc, the minister responsible for Canada-U.S. trade, has continued to correspond by text message with U.S. Commerce Secretary Howard Lutnick, according to a Canadian government official with knowledge of the talks. But no date has been set for further meetings between the two, the official said.
Meanwhile, Canada’s goals in the trade talks have narrowed, the official said. The Globe is not naming them so they could speak freely about the state of the talks.
Instead of seeking a comprehensive deal to remove all tariffs as part of a “grand bargain,” Ottawa is prioritizing relief for the specific industries hit by Section 232 tariffs, while preparing for the coming renewal of the United States-Mexico-Canada Agreement.
The continental trade agreement, which replaced NAFTA in 2020, comes up for review every six years, giving each country the opportunity to reopen it to address complaints. The process is scheduled to begin next year, with preliminary consultations starting this fall. Some observers expect the U.S. to accelerate that timeline.
Right now, the USMCA provides a significant shield for Canadian companies. Because Mr. Trump’s blanket 35-per-cent tariff does not apply to goods that meet USMCA rules of origin, upward of 90 per cent of Canadian exports continue to enter the U.S. without incurring duties.
That has sheltered the Canadian economy and made the trade war largely about the sectors hit by 232 tariffs.
Brian Clow, who was deputy chief of staff and bilateral relations adviser to former prime minister Justin Trudeau, said Mr. Carney and his government are caught between the desire to stand firm against protectionist U.S. demands and the reality of mounting economic pain.
“They should not accept a bad deal, they should not feel they have to accept just any deal. But at the same time, the current situation can only go on for so long until we start seeing permanent job losses,” he said.
There are some hints that Washington is open to arrangements that reduce 232 tariffs, at least on the aluminum sector. Canada provides a huge portion of the U.S.’s aluminum, for which there is no obvious replacement. Last month, U.S. Treasury Secretary Scott Bessent highlighted this dependency in a television interview, noting Ford F-150 trucks manufactured in the U.S. rely on Canadian aluminum.
Jean Simard, chief executive of the Aluminum Association of Canada, said there’s a broad sense of hardship in the U.S. auto industry, “because they’re now feeling the brunt of a 50-per-cent tariff on metal supplies since the stockpiled inventories have been depleted and now they’re moving forward on full tariff-impacted supplies.”
But since last month, “there hasn’t been any more conversation, discussion and certainly not negotiations” around reducing aluminum tariffs, he said.
The key question is what could bring both sides back to the negotiating table in a more substantial way. Some observers think Ottawa’s hand will gradually strengthen, if the U.S. economy continues to weaken, inflation rises and major American manufacturers who rely on Canadian inputs increase their pressure on the White House.
But Mr. Carney faces his own economic and political constraints. So far Canada’s economy has held up much better than economists expected. But a surge in exports that happened in the first quarter has gone into reverse in the second, weighing on GDP growth, and business investment is expected to remain on ice while tariff uncertainty continues.
Last week, the U.S. expanded the scope of its steel and aluminum tariffs to cover around 400 additional “derivative” products, ranging from packaging materials to home appliances to heavy machinery.
Meanwhile, Conservative Leader Pierre Poilievre, who will return to the House of Commons next month after winning a by-election, has already started ramping up the pressure on Mr. Carney on trade.
“He’s made concession after concession to President Trump and he got nothing in return,” Mr. Poilievre said Wednesday, pointing to Ottawa’s decision in June to scrap its Digital Services Tax to prevent Mr. Trump from abandoning negotiations.
Earlier on Thursday, Foreign Affairs Minister Anita Anand met with her counterpart, Secretary of State Marco Rubio, in Washington. It was their first meeting since Ms. Anand took the post more than three months ago.
In a statement, State Department spokesman Tommy Pigott said the pair discussed Mr. Trump’s efforts to broker a Russia-Ukraine peace deal, the security situation in Haiti, Hamas’s “ongoing obstruction of peace in Gaza” and unspecified “coercive activity” by China.
Mr. Rubio and Ms. Anand made only a brief public appearance. Ms. Anand cancelled a planned media availability.