Canada-U.S. Trade Minister Dominic LeBlanc and Canada’s lead trade negotiator Janice Charette speak to media at the Canadian embassy in Washington, on June 2.Anna Rose Layden/Reuters
Canada-U.S. trade talks are down to the wire this week as Ottawa tries to avert punitive new tariffs scheduled to be imposed by the Trump administration on Wednesday.
Negotiators were bargaining throughout the weekend, culminating Sunday afternoon with a virtual meeting between Canada-U.S. Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer. The two were joined by Canada’s lead trade negotiator, Janice Charette, Mr. LeBlanc’s office said Sunday.
Mr. LeBlanc remained in Washington on the weekend and his office said he would stay through Monday as the fight for a deal heats up.
In advance of Mr. LeBlanc’s Sunday meeting, five sources briefed on the discussions said Section 232 tariffs on autos and lumber remained the biggest points of contention. According to the sources, American negotiators have opposed lowering those tariffs on lumber and proposed reducing the tariffs on autos to 15 per cent – a number that is too high for Canada to accept.
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Ottawa, meanwhile, is preparing plans for retaliation if the White House makes good on its threat to slam new levies on US$20-billion worth of Canadian goods on Wednesday, one of those sources and a different source confided.
The Globe and Mail is not identifying the sources, who were not authorized to disclose details of the confidential negotiations.
Mr. LeBlanc’s office said that the minister and Ms. Charette had a constructive hour-long meeting with Mr. Greer. “They took stock of the work that has been done by their respective negotiating teams, and discussions are continuing,” spokesperson Gabriel Brunet said.
Tariffs on autos and lumber remain the biggest points of contention in the trade talks.DARRYL DYCK/The Canadian Press
Prime Minister Mark Carney’s office initially said he would be in Italy until Monday on vacation, but spokesperson Renée LeBlanc Proctor said he returned Sunday and will be in St. John’s on Monday. His office did not respond to questions from The Globe about whether he has spoken with U.S. President Donald Trump or whether any calls with him were planned.
Canada is trying to negotiate a deal that will avoid new tariffs under Section 338 of the Smoot-Hawley Tariff Act of 1930, which Mr. Trump has threatened to bring in on Wednesday.
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Ottawa is also seeking to lower levies on steel, aluminum, autos and lumber that Mr. Trump imposed last year under Section 232 of the Trade Expansion Act of 1962.
The Globe has previously reported that the United States is considering lowering − but not eliminating − the Section 232 tariffs and shelving the Section 338 tariffs in exchange for several concessions from Canada including eliminating retaliatory auto tariffs, agreeing to Washington’s interpretation of how dairy quotas should be allocated, and ending boycotts of American alcohol.
On Sunday, four of the sources told The Globe that the U.S. has demanded that Canada accept a tariff rate of 15 per cent on autos exported to the U.S. plus a continued exemption for the portion of the vehicles that are American content in exchange for Canada lifting its retaliatory tariffs. But, two of those sources said, Canada has argued that such a tariff is still too high for the industry to remain viable, as profit margins are in the single digits.
Those two sources and another one said Canada has also proposed that the full value of all content originating from within the United States-Mexico-Canada Agreement zone be exempted from the tariff, meaning the levy would only apply to the value of components from outside North America.
One of the sources said the question of whether the exemption should cover only U.S. content or all North American content is a larger unresolved issue than the precise percentage of the tariff.
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The goal of the American proposal is to embed structural advantages in the agreement that will incentivize companies to steadily decrease their use of Canadian content in auto manufacturing, said Eric Miller, a trade adviser and president of the Rideau Potomac Strategy Group.
He said the proposal from the United States creates an “existential fear” for Canadian car and auto parts manufacturers because it would slowly eat away at the industry north of the border and hurt both the Canadian and Ontario economies.
On forestry, the U.S. does not want to offer any reduction of Section 232 tariffs on the sector, three of the sources said. Instead, the U.S. has argued that Canada should wait for the results of a separate review by the U.S. Department of Commerce that is expected to reduce a different set of tariffs on softwood lumber, one of the sources said. However, another of the sources said the fear in Canada is that Washington would simply raise the Section 232 tariffs on lumber when the other ones are lowered.
A different source said the best Canada could hope for is an agreement from the U.S. to discuss forestry tariffs further.
B.C. Premier David Eby and Ontario’s Doug Ford have both said they will only agree to put American alcohol back on store shelves if there is a meaningful reduction in the tariffs applying to their hardest-hit sectors, including autos and lumber.
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British Columbia’s forestry industry has been hit hard by the Trump policies because the Section 232 tariffs on lumber stack on top of pre-existing countervailing and anti-dumping tariffs. The B.C. Lumber Trade Council’s interim president, Kim Haakstad, said Sunday she is concerned that if the 232 tariffs stay in place, more mills could close.
She cautioned that has knock-on effects for other companies because when primary manufacturing shutters, so too can secondary facilities.
The B.C. Lumber Trade Council argues that the two countries produce different types of lumber, which don’t compete because they are used for separate construction purposes. Ms. Haakstad said the tariffs only raise prices for American consumers. However, Mr. Miller said that’s precisely what the U.S. Lumber Coalition is lobbying for and the group is going “all out” to keep the 232 tariffs in place.
If Mr. Trump unleashes his latest threatened tariffs, they would be layered atop existing tariffs, adding a 50-per-cent duty to US$20-billion worth of Canadian electronics, dairy, alcohol, wood and other products.
Mr. Carney has previously said that all options will be on the table if the U.S. imposes the new Section 338 tariffs on Wednesday. However, he has ruled out using Canada’s oil exports to retaliate.
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Ms. Charette has told U.S. negotiators that the imposition of the new tariffs would represent a “cliff” in negotiations: If they come into effect, Ottawa would be forced to retaliate.
Former Quebec premier Jean Charest, who sits on Mr. Carney’s advisory committee on Canada-U.S. economic relations, said in a Sunday interview that the Prime Minister faces no good options as he navigates the current trade relationship with Mr. Trump.
“There’s only bad choices in this world,” Mr. Charest said.
The Prime Minister has frequently argued that despite the trade war, Canada still has better access to the U.S. market than others. Mr. Charest agreed with that but noted “it’s a difficult argument to make to a person who’s lost their job.”
He said there is hope that a deal could lead to a better outcome for Canadian industries than the current playing field. However, he added that any level of tariffs that Canada agrees to will be a difficult sell with Canadians who have little patience for any perceived concessions.
He said that if no deal is reached and the new tariffs are imposed on Wednesday, the U.S. should expect a “strong response” from Canada.