Canada News
What you need to know on the Canada-U.S. tariff talks
Abi Sarabia M., Philippine Canadian Inquirer
August 18, 2026
Photo courtesy: Investopedia
Canadian and American negotiators are racing to finalize a preliminary trade agreement before a Wednesday, August 19 deadline, when new U.S. tariffs on Canadian electronics, alcohol, and dairy products are set to take effect.
Here’s what’s at stake:
- A deal could lower tariffs on autos, steel, aluminum, and wood in exchange for concessions.
Under the framework being discussed, Washington would reduce its existing tariffs on Canadian autos, steel, aluminum, and forest products in exchange for Ottawa agreeing to a set of American trade demands covering alcohol, dairy access, and government procurement rules.
The current tariffs: 25 percent on autos and 50 percent on both steel and aluminum were imposed under Section 232 of the Trade Expansion Act of 1962.
The new tariffs facing the August 19 deadline fall under a different law, Section 338 of the 1930 Smoot-Hawley Tariff Act, and could affect roughly US$20 billion worth of additional Canadian goods.
The proposed deal would cut auto tariffs to 15 percent, though Canada and the U.S. disagree on which content should be exempt. Steel and aluminum would move to a quota system, with tariffs rising sharply once the quota is exceeded.
- Forestry remains a major sticking point.
Current tariffs on wood products range from 10 percent on lumber to 25 percent on furniture, layered on top of levies that have existed for nearly a decade.
Washington has pushed to exclude forestry from this round of talks or negotiate it separately, partly because an ongoing U.S. Department of Commerce review could lower existing lumber duties on its own.
- Canada would have to drop about ten trade “irritants.”
In exchange for lower tariffs, Washington is asking Canada to drop roughly ten trade irritants, including all Canadian retaliatory tariffs on U.S. goods, provincial bans on American alcohol sales, Buy Canadian procurement policies, and disputes over Canada’s supply-managed dairy sector.
Because several of these fall under provincial jurisdiction, Prime Minister Mark Carney would need buy-in from premiers in Ontario (autos and steel), Quebec (aluminum and dairy), and British Columbia (forestry).
- Defence and critical minerals are shaping the talks, even though they’re meant for a later phase.
U.S. demands on defence, critical minerals, and energy are expected to be negotiated later, but are already influencing the current round.
Washington wants first refusal on Canadian critical minerals, follow-through on Canada’s delayed $88 billion F-35 fighter jet purchase, Canadian purchases of American radar technology tied to Trump’s proposed Golden Dome missile-defence system, and firmer commitments on oil and gas exports.
- If talks fail, Canada is expected to retaliate.
Chief negotiator Janice Charette has told U.S. Trade Representative Jamieson Greer that a failure to reach agreement by Wednesday would leave Canada with little choice but to break off negotiations and retaliate, described as a factual assessment of political reality rather than a threat.
Ottawa is already preparing retaliation options, which could include reinstating tariffs first introduced by former Prime Minister Justin Trudeau in early 2025, tariffs Carney rolled back twice over the past year.
A deal may not materialize until Tuesday night, and Trump could also choose to delay the tariffs, though the U.S. side has not committed to that option.
What’s next?
If an agreement is reached this week, it would mark only the first phase of broader talks. Canada, the U.S., and Mexico are also expected to begin discussions on overhauling the USMCA, with Washington pushing for North American content requirements in autos to rise from 75 to 82 percent.
