Eric Ham is based in Washington, D.C. and is a political analyst for CTV News. He’s a bestselling author and former congressional staffer in the U.S. Congress and writes for CTVNews.ca.
The clock is ticking on Ottawa and Washington formalizing an agreement on tariffs before the Aug. 1 deadline.
Canadian officials are in Washington meeting with Trump administrators in hopes of averting rising import duties on Canadian goods entering the United States.
Recent agreements involving Japan and the European Union offer a blueprint for what might be expected should the two nations and top trading partners come to terms. However, key sticking points are emerging that could potentially derail negotiations and send the regional economy into a tailspin.
Below are key issues and an overall framework of what could be included in any agreement.
Baseline number
One of the overarching components of all the frameworks the White House has established with every country to date on agreed trade is a tariff baseline.
In the case of both Japan and the European Union it is 15 per cent. U.S. President Donald Trump himself has stated that all the agreements will absolutely include import duties with no exceptions and those rates range between 15 and 20 per cent.
Even with a free trade agreement in place already and Canada being one of the United States’ biggest trading partners, it is unlikely negotiators get below this baseline number.
Trump has already shown a propensity to walk away from a deal and, with frameworks already in place with Japan and the European Union, along with a possible agreement with Beijing looming, Canada is not a priority for this White House.
That alone makes it easier, not harder, for Trump to walk away from a deal that does not offer a rate of at least 15 per cent on all Canadian imports.
Pharmaceuticals
Long before the deadline of Aug. 1 on all trade deals, Trump was forecasting tariffs on pharmaceuticals entering the United States. However, throughout the announcement of the highly touted agreement with the European Union there is still ambiguity on pharmaceuticals.
“We have 15 per cent for pharmaceuticals. Whatever the decision later on is, of the president of the U.S., on how to deal with pharmaceuticals in general globally, that’s on a different sheet of paper,” Ursula Von der Leyen, president of the European Commission, said Sunday.
Clearly, the EU chief seems to be hedging her bets on whether the president’s pending duties on pharma will subject medicines to additional levies.
Trump said earlier in July that a tariff announcement on pharmaceutical imports into the U.S. would come “very soon” and could run as high as 200 per cent. It comes after his administration launched a Section 232 investigation into the sector, which explores the impact of pharma imports on national security, with the outcome due by August.
The United States is one of Canada’s largest markets of pharmaceutical products and negotiators want to outline specific agreements to ensure future tariffs on nearly US$1 billion in pharmaceutical products are not subject to additional crippling tariffs.
Metals
Perhaps one of the biggest challenges of the negotiations will be the import rates on steel, aluminum and copper.
Again, using the European Union as a blueprint, U.S. negotiators were able to orchestrate a nearly 15-point rate hike across the board on all European imports, while also keeping the duties on steel, aluminum and copper at an astronomical 50 per cent.
Much like pharmaceuticals, Canadian metal producers’ most lucrative market for steel, aluminum and copper is the United States. Yet, given the president was able to get America’s biggest trading partner by volume (the EU) to accept the still massive rate on metals, Canada, too, will likely have to accept the status quo unless it is willing to walk away from the negotiating table.
According to Canadian data, the U.S. was Canada’s largest copper importer in 2023, which doesn’t allow for many options for Ottawa’s negotiators.
Spirits
As relations soured between the two neighbours, Canadians expressed their frustrations with skyrocketing tariffs through boycotts of American spirits.
As a result, Trump and others within the White House lashed out, which saw diplomacy between the two allies reach its nadir. The “Buy-Canadian” movement continues to hold strong and has led to the American president referring to the Great White Northerners as “mean and nasty to deal with” as a result.
Still, the move by America’s neighbour to the north could provide some leverage in the trade talks even if it means exempting specific goods from the Trump tariffs.
Trump’s framework with the EU left spirits untouched but, considering American distillers are losing out on a crucial market, it is likely Canadians will want something in return to coax Canadian consumers back to the registers.
Time is of the essence for negotiators to reach an agreement. Still, it is hard to gauge the distance between success or failure.
Staring down baseline rates exceeding 30 per cent has certainly moved nations to bend to Trump’s many demands thus far.
Canadian negotiators hold some points of leverage, including support for the White House’s Golden Dome missile defence program. Will it be enough to move an unpredictable Trump, however, is anyone’s guess.
Perhaps success or failure depends on both sides’ willingness to avert economic calamity. Trump’s penchant for chaos runs deep, but Prime Minister Carney has proven to be a cunning and crafty pol. Clearly, these characteristics will determine deal or no deal!
