Washington: US President Donald Trump has paused planned 50 per cent tariffs on about USD 20 billion worth of Canadian imports after the United States and Canada reached a last-minute deal to continue negotiations.
Trump announced the move on Tuesday, less than two hours before the 12.01 a.m. (GMT-4) Wednesday deadline for the tariffs to take effect.
"I have paused the 50 per cent Tariffs against Canada, that were scheduled to kick in tomorrow morning for a three day period, based on the fact that Canada and the USA., subject to the finalization of documents, have a DEAL!" Trump said in a post on Truth Social.
The decision follows an intense diplomatic push between Washington and Ottawa, with Canadian Prime Minister Mark Carney and Trump speaking twice by phone over the previous two days.
The proposed tariffs would have affected about 5 per cent of Canada's annual exports to the United States, including products ranging from hockey sticks to tongue depressors.
The two countries have long been close allies and major trading partners, despite periodic disputes over issues including Canadian softwood lumber exports and US access to Canada's protected dairy market.
Canadian soldiers fought alongside US forces in Afghanistan following the September 11, 2001, attacks. The 5,525-mile US-Canada border remains undefended, while nearly 330,000 people and goods worth about USD 2 billion cross the border each day. Around 800,000 Canadians live in the United States.
Trump's approach to Canada has marked a sharp departure from that traditionally cooperative relationship. He has imposed tariffs on Canadian goods as part of his effort to bring manufacturing back to the US and has repeatedly spoken about turning Canada into America's 51st state.
The latest tariff threat had also raised the prospect of another round of retaliation from Ottawa. Canada had indicated that it could respond with tariffs of its own if the new US measures took effect.
That could have further strained economic ties between the two countries, which exchanged about USD 880 billion worth of goods and services last year.
Looking for an off-ramp
Nearly 72 per cent of Canada's goods exports last year went to the United States, making access to the US market critical for the Canadian economy.
The proposed tariffs could also have increased costs for US importers, who may have passed some of those costs on to consumers through higher prices.
The last-minute agreement gives both sides additional time to negotiate and potentially avoid a broader trade confrontation.
Canada has been seeking relief from US tariffs on steel, aluminium and softwood lumber, while Washington has been pressing Ottawa for greater concessions on trade and other economic issues.
Why Section 338 matters
Trump had invoked Section 338 of the Tariff Act of 1930 to threaten tariffs of up to 50 per cent on selected Canadian imports.
The provision allows the US president to impose tariffs on imports from countries that have discriminated against American businesses. Unlike Section 301 of the Trade Act of 1974, it does not require a prior investigation and does not impose a fixed limit on how long the tariffs can remain in place.
The provision dates back to the period of the Great Depression. The Smoot-Hawley tariffs of 1930 are widely criticised by economists and historians for restricting international trade and worsening the global economic downturn.
Trump's threatened Section 338 tariffs would have targeted products accounting for about 5 per cent of Canadian exports to the United States.
USMCA negotiations in focus
The tariff dispute comes as Washington, Ottawa and Mexico prepare to renegotiate the United States-Mexico-Canada Agreement, or USMCA.
The threat of additional tariffs had given Washington leverage to seek concessions from Canada ahead of those negotiations.
For Ottawa, however, any agreement needs to balance economic interests with domestic political pressure. Public opposition to Trump's policies has grown in Canada, limiting the government's room to make major concessions without facing a political backlash.
The three-day pause now gives the two sides more time to finalise the documents and work towards a broader trade understanding.
Trump's announcement means the immediate tariff escalation has been avoided, but the wider US-Canada trade dispute remains unresolved.
