50% Steel Tariffs Spur Washington and Ottawa to Seek Deal Before November Election
Key Facts
The United States and Canada are working on a deal to ease U.S. tariffs on Canadian steel and cars, Reuters reported on October 26, citing two U.S. sources and four Canadian sources. The talks are an effort to repair relations that deteriorated after trade negotiations collapsed in August. Negotiations cover Section 232 tariffs of up to 50% on Canadian steel and a 25% tariff on cars, Reuters reported. A Canadian source said a deal on the two sectors could be reached before the U.S. election scheduled for November 3. But U.S. sources said President Donald Trump's administration wants Canada to make further concessions, making a deal a possibility under negotiation rather than an announced settlement.
U.S. Commerce Secretary Howard Lutnick and Dominic LeBlanc, Canada's minister responsible for trade with the United States, are handling the ongoing contacts and have been in regular communication recently, Reuters reported. LeBlanc's office said Canada remains in contact with Washington, without announcing a deal or specifying any concessions under discussion. A Canadian industry source described any potential understanding as possibly limited in scope. The source said: "If it happens, it will happen quickly, but my impression is that it will be a narrow deal, if it happens at all." Another Canadian source said Trump and Prime Minister Mark Carney would lead any potential deal, placing the political track between the two leaders at the center of any settlement. No details were provided on which sectors a deal might cover or on its terms.
The negotiations matter because of Trump's earlier threat to raise tariffs on Canadian steel and car imports to 50% effective January 1, 2027, as Reuters reported. This track is separate from another change to U.S. tariffs on Canadian products under Section 338: the U.S. presidency announced that adding products to and removing them from the scope of those tariffs would take effect on October 30. The changes include removing products such as plywood, certain paper products, machinery, refrigeration equipment and packing boxes, while adding other products. The current talks concern Section 232 tariffs on steel and cars, while the Section 338 changes target the scope of other products. The negotiating focus, then, is on avoiding the increase scheduled for early 2027, alongside separate tariff changes taking effect in October.
An earlier effort to partially lower tariffs stalled in part over a dispute about whether relief would cover medium- and heavy-duty trucks, according to a Reuters report cited by Investing.com. The earlier offer would have lowered tariffs on Canadian cars and light trucks from 25% to 15%, and cut steel and aluminum tariffs from 50% to 25%. The dispute over medium- and heavy-duty vehicles left a gap in the scope of coverage, an issue relevant to factories and cross-border supply chains. The search for a new understanding comes after August talks collapsed, while sources point to the possibility of a narrower deal this time. The two governments have not yet announced a new framework or agreed rates.
In response to the impact of the tariffs, the Canadian government and the government of Ontario announced investments and measures totaling 8.7 billion Canadian dollars on October 21 to strengthen strategic industries and support workers and companies affected by U.S. tariffs. The plan includes five-year commitments to the joint steel action fund of 3.55 billion dollars from the federal government and 1.67 billion dollars from Ontario. These allocations place the steel sector among the government's response priorities, alongside broader measures to protect workers and companies. Mark Carney said on October 21 that the tariffs had raised costs for U.S. households and left workers and companies in Ontario at a disadvantage and facing uncertainty. He added that Canada remains ready to negotiate. The government package reflects an effort to support affected sectors as trade talks continue.
In the market, Canada's S&P/TSX Composite Index rose 0.6% on October 21 to 36,324.99 points, its highest close since September 22, Reuters reported. The report linked the index's rise to investors welcoming government support measures for sectors affected by U.S. tariffs. On trade, Global Affairs Canada said the next monthly trade report will provide an initial look at the early effects of Canadian and U.S. tariffs imposed in late summer. The agency set November 4 as the date for the next release. The report is expected to offer an early indication of how the tariffs are affecting bilateral trade, as negotiations on steel and cars continue and the U.S. election approaches.