With less than two hours left before a 50% tariff wall went up against roughly $20 billion in Canadian goods, President Trump blinked, or won, depending on who you ask.
Late Tuesday evening, he announced on Truth Social that the duties set to take effect at 12:01 a.m. Wednesday would be paused for three days because, in his words, “Canada and the U.S.A., subject to the finalization of documents, have a DEAL!”
Ottawa’s version is more cautious. Prime Minister Mark Carney confirmed the three day reprieve and said the two sides had made “substantial progress,” but warned that “important work” remains before anything is signed.
This standoff began on July 20, when Trump issued three proclamations. The presidential proclamations invoked Section 338 of the Tariff Act of 1930 (a dormant statute that allows a president to impose tariffs of up to 50% on countries found to be discriminating against U.S. commerce. No president had ever actually used it; therefore, there are no implementing regulations and no judicial precedents.
To justify the action, administration’s grievances were specific: alcohol, autos and dairy. First, on alcohol, Canadian provinces have boycotted U.S. alcoholic products since March 2025 while leaving other trading partners untouched, and as a result U.S. alcohol exports to Canada fell roughly 81% afterward. On automotive products, Canada’s 25% retaliatory tariff applies only to U.S. origin vehicles, exempting everyone else, and as a result U.S. auto exports to Canada have dropped about 22%. On dairy, Washington argues Canada’s USMCA cheese quota gives American exporters worse access than European sellers enjoy under Canada’s separate deal with the EU.
The resulting tariff list covered 554 tariff subheadings in trade with Canada, including the dairy, alcohol, and motor vehicle sectors, but also sweeping in an eclectic range of products from hockey sticks to tongue depressors, and more. Despite the high percentage rate, the breadth of coverage in terms of products, only amounts to about 5% of Canadian exports to the U.S. It’s a strike aimed at politically sensitive industries to Quebec that is worth about $880 billion a year. It’s a tough problem for Canada, because roughly 72% of everything that Canada does export, does ship to the United States.
The details of the deal are not known. According to the White House, Canada “expressed a commitment” to remove the measures the administration considers discriminatory toward U.S. alcohol, dairy, and motor vehicle exports. While Canada has confirmed the three day delay, it has not publicly confirmed those commitments.
In addition, Trump floated the concept of a revival of the Keystone XL pipeline, which the Biden administration has closed down, as part of a broader thaw in the relationship; again, however, nothing concrete has been confirmed or announced on that either.
At present, the pause lasts for only three days - meaning that there will be more news to come on Friday.