Key factors of the agreement
What is known about the negotiations
The new trade agreement currently being finalized between the U.S. and Canada may provide for reducing tariffs on vehicles assembled in Canada from 25% to 15%. This will undoubtedly have a significant impact on the country’s automotive industry.
This week, U.S. President Donald Trump and Canadian Prime Minister Mark Carney, together with negotiating teams, worked out the terms of an important trade agreement. The American leader threatened to impose blanket 50 percent tariffs on Canadian goods starting Wednesday, but later moved the deadline to Saturday, hoping to finish the deal by then.
Tariffs on cars, steel and aluminum
According to Reuters, the new 15 percent tariffs on cars could be applied with the value of American components used in vehicles produced in Canada deducted. This means the actual tariff burden could be even lower than 15%.
Equally important is the possible reduction of tariffs on steel and aluminum from 50% to 25%. The reduced rate is expected to apply to volumes up to 4 million metric tons per year, while imports above that level will continue to be taxed at 50%.
The deal is almost ready
After the latest round of negotiations, President Trump told journalists:
Once the documents are finalized, we have a deal with Canada.
Carney did not directly confirm the deal, but said significant progress had been made in the talks. His words are quoted by Bloomberg:
Canada entered these negotiations with the best overall trading terms. We are moving toward an agreement that strengthens this advantage for Canada, in particular by locking in the best terms in each of Canada’s most important strategic sectors and providing greater certainty about our future trade relationship.
What’s next
If the documents are signed by Saturday, the two sides will avoid another round of trade war. For automakers, this will reduce uncertainty and help maintain the competitiveness of Canadian plants. At the same time, restrictions on preferential volumes of steel and aluminum show that the U.S. still seeks to protect its own industry.
It was earlier reported that Canada reduced automobile production by 64,000 units, while American plants increased output by 44,000. This shows how important maintaining stable access to the U.S. market is for the Canadian economy.