Nicolai Haugsted
Trump under pressure to soften major tariff before Wednesday deadline.
Trade officials from Washington and Ottawa are working against the clock to settle a dispute that could reshape the cost of moving cars and other goods across one of the world’s largest trading relationships.
According to Reuters, negotiations have intensified ahead of a Wednesday deadline for another round of US tariffs, with officials discussing a potentially substantial concession on Canadian-made vehicles.
Three people familiar with the negotiations told Reuters that the two sides are considering a framework that could reduce President Donald Trump’s 25 percent tariff on Canadian vehicle imports to 15 percent, before deductions based on where components originate.
Car tariffs could fall sharply
Trump imposed the current 25 percent vehicle tariff under Section 232, which allows Washington to restrict imports on national security grounds.
Pressure for a compromise has increased as Canada’s automotive industry warns about the consequences. Existing tariffs have raised concerns over production and even possible assembly-line shutdowns.
Reducing the headline rate to 15 percent would provide immediate relief, but negotiators remain divided over how much of each vehicle should ultimately be subject to the tariff.
Washington wants deductions to apply only to the value of specifically American content contained in vehicles imported from Canada.
Ottawa is pushing for a broader calculation covering qualifying components produced throughout North America, including Canadian and Mexican parts.
Such an arrangement could have a considerable effect on the final bill. Auto industry officials estimate that recognizing wider North American content could bring the effective tariff on some regionally manufactured vehicles into single digits.
Wednesday deadline raises pressure
Cars represent only part of the increasingly urgent negotiations.
Another $20 billion worth of Canadian goods could face steep new US duties from Wednesday unless the countries can bridge their remaining differences.
Officials from both governments have held daily discussions over the past week as they attempt to resolve several disputes that have accumulated during the broader trade confrontation.
Canadian retaliatory tariffs on some American vehicles and steel remain part of the discussions. Washington has also raised objections to decisions by several Canadian provinces to remove US alcohol from store shelves, alongside longstanding complaints over Canada’s allocation of dairy import quotas.
Negotiators are dealing with those disagreements separately from discussions over the future of the US-Mexico-Canada Agreement, or USMCA.
Foreign competitors enjoy lower rates
Pressure on Canada’s automotive sector also comes from the tariff treatment granted to some of its biggest international competitors.
Vehicles imported into the United States from Japan, South Korea and the European Union currently face a 15 percent tariff, while most British vehicles are subject to a 10 percent rate.
Canadian manufacturers operating under the current 25 percent tariff therefore face a significant disadvantage despite belonging to a deeply integrated North American supply chain.
Industry officials told Reuters that either version of the proposed reduction would represent an improvement, regardless of whether deductions ultimately cover American components alone or qualifying content from across North America.
A broader regional deduction would provide considerably greater relief, potentially giving North American-built vehicles an effective tariff below those imposed on imports from several major overseas competitors.
Officials still have significant differences to resolve before Wednesday, leaving the treatment of vehicle components among the central questions as Washington and Ottawa attempt to prevent another escalation in their trade dispute.
