Trump pauses 50% tariffs on Canada for three days as trade deal nears

Canada has secured a three-day reprieve from a new round of steep US tariffs after President Donald Trump said Washington and Ottawa were close to reaching a trade agreement.

Trump announced the delay on Tuesday night, about 90 minutes before the tariffs were due to take effect.

The White House said Canada had agreed to certain trade concessions and that the additional time was needed to finalize the terms.

“I have paused the 50% Tariffs against Canada, that were scheduled to kick in tomorrow morning for a three day period, based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!” Trump said.

The White House has not released details of a finalized agreement, leaving uncertainty over whether the two sides can complete the deal before the new deadline.

However, he suggested that the agreement could involve reviving the Keystone XL Pipeline, a long-delayed project designed to transport crude oil from Alberta to the US Midwest.

The Office of the US Trade Representative said the potential agreement would include “comprehensive market access for all American goods, economic security commitments, digital trade alignment, and many important provisions that will continue to protect our market and American workers, along with our Canadian partners.”

Why are the tariffs being imposed?

The proposed tariffs were announced last month in response to what the Trump administration described as Canadian trade discrimination involving the automotive, alcohol and dairy industries.

The duties would be imposed under Section 338 of the Tariff Act of 1930, a rarely used provision dating back to the Great Depression.

The tariffs would apply to roughly $20 billion of goods out of more than $383 billion worth of Canadian products imported by the US.

Although the targeted imports represent a relatively small portion of total US-Canada trade, the products affected include some highly visible consumer goods such as hockey equipment, wine and forestry products.

Trump has already imposed several other tariffs affecting Canadian exports, including duties on metals, lumber and auto parts.

The US has also previously imposed tariffs linked to alleged drug-trafficking concerns, although the Supreme Court struck those down in February.

Why does it matter to Canadian businesses?

The proposed 50% tariff would be particularly damaging to companies that depend heavily on sales to US consumers.

A tariff of that size could make many products significantly more expensive in the American market, potentially forcing Canadian businesses to absorb some of the cost or risk losing customers.

“A 50% tariff essentially makes a product uneconomic to sell into a particular market,” said Dan Kelly, president of the Canadian Federation of Independent Business, in an interview with CNBC.

Kelly said some of the organization's 103,000 members were already seeing US buyers delay orders ahead of the tariff deadline.

Many businesses said the duties could “grind their US sales to a halt” if they were implemented, he said.

The risks extend beyond individual companies.

Trade experts and industry groups have warned that prolonged tariffs could trigger job losses and business closures in vulnerable Canadian sectors, particularly lumber, wine and dairy.

Why is the three-day delay important?

The pause gives negotiators a narrow window to turn Trump's announcement of a potential deal into a formal agreement.

It also gives businesses temporary relief from preparing for an immediate 50% increase in tariffs, although uncertainty remains because the underlying dispute has not been resolved.

Carney appeared more cautious than Trump in his assessment of the negotiations.

“Over the last number of weeks, Canada has engaged in intensive discussions with the United States to address outstanding trade issues,” he said.

“Substantial progress has been made, although there is important work still to be done.”

The Canadian prime minister also signaled that Ottawa wants to reduce its reliance on the US economy.

“Canada remains focused on building a stronger, more independent, and more competitive economy at home.”

That stance could become increasingly important if negotiations fail.

The proposed tariffs would not only threaten Canadian exporters but could also complicate broader negotiations over the USMCA, the trade agreement governing commerce between the US, Canada and Mexico.

For now, the three-day pause has prevented an immediate escalation.

But unless the two countries can finalize their agreement, Canadian businesses could soon face the same tariff threat that prompted the last-minute reprieve.