After a blown deadline, what next for US-Canada trade?

August 1, 2025

Canada and the United States remain locked in a six-month tariff dispute with no immediate resolution in sight, despite earlier optimism following their summer deadline agreement at the G7 meeting. Prime Minister Mark Carney has maintained that Canada won't accept just "any deal," prioritizing quality over speed, while President Trump's criticism of Canada's recognition of a Palestinian state has further complicated negotiations. Although Canada faces a nominal 35% tariff rate, approximately 90% of Canadian exports can still enter the U.S. duty-free under the existing CUSMA/USMCA agreement if proper paperwork is filed.

Who is affected

Canadian businesses, particularly those in steel, aluminum, auto, and auto parts sectors that export to the U.S.
American businesses, especially smaller firms with fewer resources to withstand tariffs
Canadian consumers potentially facing higher prices on U.S. imports
U.S. automakers being squeezed by the 50% steel and aluminum tariffs
Canadian exporters who must navigate the tariff exemption paperwork under CUSMA
The Canadian dairy industry, which Trump has criticized for its protections

What action is being taken

Canadian negotiators are currently in Washington continuing trade talks with U.S. counterparts
Canada is imposing C$60 billion ($43.3 billion) in counter tariffs on various American goods
Ottawa has implemented relief programs for affected Canadian industries
Canada has ramped up defense spending, boosted border security, and killed a digital tax opposed by American tech firms
Canadian businesses are actively diversifying suppliers (40% of exporters) and buyers (28%) outside the U.S.
Canada has introduced new border protections and appointed a "fentanyl czar" to address Trump's drug concerns

Why it matters

This trade dispute impacts the deeply integrated economies of two major trading partners, with potential long-term consequences for North American supply chains. The current CUSMA/USMCA agreement, which allows most Canadian exports to cross the border duty-free, is up for review next year, making the current negotiations critically important for future trade relations. The tariff war is forcing Canada to reconsider its economic dependence on the U.S. and accelerate efforts to diversify trade relationships, improve interprovincial commerce, and advance major projects. For businesses on both sides of the border, the uncertainty is disrupting planning and potentially reshaping long-established supply chains and trade patterns.

What's next

No explicit next steps stated in the article

Read full article from source: BBC