Reading Between the Lines on the State of the Canada-US Trade Deal

News Analysis

There’s been very little publicly shared about the progress of Ottawa-Washington trade talks, but what little has been revealed in recent weeks hasn’t been very positive.

Publicly, the cabinet has said the trade talks with the Trump administration are moving along positively, while at the same time stressing that they need to keep the discussions to the negotiating table and that they can’t disclose much more.

But from what can be gathered from public records, whether it’s the state of communication between the two leaders or messaging around the need to accelerate internal efforts to build resilience, it appears Canada isn’t on the verge of a breakthrough.

Prime Minister Mark Carney was asked by reporters to provide an update on trade negotiations on Aug. 7, to which he replied, “I’ll answer the question this way,” and then proceeded to mention his schedule in recent days, which did not include a phone call with U.S. President Donald Trump, but instead a meeting with Métis representatives on building major projects, an announcement to support the lumber industry impacted by U.S. duties, and a defence announcement on Aug. 8.

“There is so much for us to do, and we’re very focused on doing all of that, focusing on what we can control,” he said, adding that discussions are “very constructive” with the United States, but that “Canadians want us to focus here at home.”

Focusing domestically had been a key message early on when Trump started imposing tariffs in March. Much later in the game it remains a core message, but at the same time, Carney’s answer for the need to strengthen Canada domestically suggests a lack of progress on fixing trade issues with Canada’s largest trading partner.

There had been early optimism with Carney and Trump appearing to be on good terms, whether at the White House meeting in early May or at the G7 summit in mid-June. The two repeated niceties about each other and had agreed to work towards reaching a deal by July 21.

Since then, cracks have begun to show. Trump changed his tone on July 31 before raising tariffs on Canada, resembling his previous criticism of Canada’s political leadership that had been commonplace under Prime Minister Justin Trudeau.

“I have so many friends in Canada, but they’ve been very poorly led. They’ve been very, very poorly led,” he said.

Trump on that day also mentioned he “didn’t like” what Carney said about Canada’s intention to recognize Palestinian statehood while adding it was “not a deal breaker.”

“We haven’t spoken to Canada today. He’s called and we’ll see,” added the president, suggesting he had not taken Carney’s call.

Meanwhile, Trump spoke to Mexican President Claudia Sheinbaum the same day and gave her a 90-day reprieve from any tariff raises.

Carney confirmed days later not being in touch regularly with Trump. “I haven’t spoken to the president in recent days. We’ll speak when it makes sense,” Carney said on Aug. 5.

Fallout

On the economic level, the consequences of a stalemate aren’t good, but Carney has repeated in recent days that they could be much worse. With most of the trade between the two countries being tariff free by virtue of the United States-Mexico-Canada free trade deal (USMCA), the effective tariff rate placed by the United States on Canada is among the lowest.

On the political level, it could look better, with Canada being a rare major U.S. ally without a recent deal. On top of that, Canada’s being treated worse than Mexico, which has been the significant source in recent years of illegal migration and narcotics crossing into the United States.

Trump threatened in July to raise tariffs on Mexico by 5 percentage points in August but last week allowed a 90-day pause. Meanwhile, Canada was hit with a 10-percentage-point tariff hike and given no pause to negotiate.

The key difference appears to be Mexico’s more diplomatic approach, as opposed to Ottawa’s “elbows up” strategy, which came with counter-tariffs and combative messaging.

Canada wouldn’t be in bad company if only it and Mexico were left behind without a deal, but China—far from a U.S. ally—must be added to the group representing the top three U.S. trading partners. The Trump administration has noted Canada and China have been the only countries to implement retaliatory trade measures on the United States.

There could perhaps be a broader strategy on the part of Trump to deal with these countries last, although a deal was reached with the European Union, which does the most trade with the United States as a bloc.

But another factor to consider is that Canada may really be trying not to make many concessions to rush to get a deal, because with the USMCA exemptions, the impact of the tariffs may not be very pronounced. The Opposition Conservatives, while faulting the Liberal government for their lack of progress on a trade deal and negotiations with the Trump administration, have also said that Canada shouldn’t have set a deadline on negotiations, as it could serve as a leverage for the Trump administration to rush a deal to its advantage.

Renegotiations

Carney briefed provincial and territorial premiers on the status of U.S. negotiations this week, and what was said publicly thereafter did not suggest a deal with Canada is close.

Commenting after the first ministers meeting, Ontario Premier Doug Ford instead predicted that Trump would open renegotiations early for the USMCA free trade agreement. According to terms of the deal, renegotiations can take place starting in 2026.

“We better be ready and throw everything and the kitchen sink at this. This isn’t going to be a church picnic,” Ford said on Aug. 6.

Ford’s concern around early renegotiations appears more acute than the prospect of Canada not reaching a trade deal to reduce U.S. tariffs. “No deal is better than a bad deal,” he said. Concerns about USMCA renegotiations could stem from information or a perception that Trump could intend to scale back the extent of free trade in North America, or try to pry open closed economic sectors.

A readout released by the Prime Minister’s Office after the first minister’s meeting also did not strike an optimistic tone about the state of trade talks. The focus was instead on quickly increasing domestic economic resilience.

“First Ministers agreed to accelerate efforts to mobilize capital and investment, diversify supply chains, and strengthen domestic production capacity,” says the document.

Carney commented on potential early USMCA renegotiations after a defence-relathttps://www.theepochtimes.com/world/reading-between-the-lines-on-the-state-of-the-canada-us-trade-deal-5898800ed announcement on Aug. 8.

“We’re very conscious that there are a couple of negotiations in sequence, and the extent to which those negotiations can be brought together and inform each other, that’s in the interest of all parties,” he said.