WASHINGTON — Canada and the United States moved closer Wednesday to finalizing a trade agreement that would avert threatened 50% U.S. tariffs, with a senior Canadian official calling the emerging terms "a very good deal for Canada" while cautioning that negotiations were not complete.
President Donald Trump said the agreement was “very fair” to both sides and predicted U.S. farmers and manufacturers would benefit. The tariffs on about $20 billion worth of Canadian imports have been postponed until 12:01 a.m. Saturday.
The senior Canadian official said the emerging agreement would provide greater certainty, protect Canada’s dairy sector and jobs threatened by the new tariffs, and preserve what Ottawa considers favorable trade terms with the United States.
Prime Minister Mark Carney has asked provincial premiers to return U.S. alcohol to store shelves, Nova Scotia Premier Tim Houston said, a step aimed at addressing one of the Trump administration’s key trade complaints. Houston and Saskatchewan Premier Scott Moe, both conservatives, voiced support for the direction of the talks, though Houston said whether Canadians would actually buy U.S. alcohol again “is a whole other discussion.”
The senior official spoke on condition of anonymity because they were not authorized to discuss the negotiations publicly before an agreement is finalized.
Dominic LeBlanc, the minister responsible for Canada-U.S. trade, returned to Ottawa on Wednesday to meet Canadian Prime Minister Mark Carney, who chaired a Cabinet meeting and a virtual meeting with provincial and territorial leaders.
Here's what to know:
Trump's tariff threat would hit 5% of Canadian exports
Last month, Trump invoked a never-before-used legal authority, dating back to the Great Depression, to announce that the United States would slap 50% tariffs on $20 billion, or about 5%, of Canadian exports to the United States, ranging from hockey sticks to tongue depressors.
Trump claimed that Canada discriminates against American exports of autos, alcohol and cheese. The U.S. president is also furious that Canada and China were the only countries that punched back with retaliatory tariffs of their own when he slapped levies on their products.
The United States and Canada have sparred for decades over trade, poking each other over sore spots like Canadian softwood lumber imports and U.S. access to Canada’s protected dairy market.
Canada's dairy market has been a persistent irritant
While details of the agreement emerging Wednesday remain vague, Trump claimed Canada had agreed to end tariffs on U.S. agricultural products. “The tariffs will be non-existent for our farmers. Our farmers were paying tremendous tariffs into Canada, and those tariffs are going to be totally eviscerated. Down to zero,” he said.
Canada currently allows a set amount of dairy imports at low tariffs. Once imports exceed that limit, much higher tariffs apply. The U.S. says Canada’s “supply management″ system makes it harder for American dairy producers to get full access to the Canadian market.
LeBlanc, talking to reporters in Washington, said Canada’s “agriculture sector will be well protected and we have maintained our tough line.’’
The senior Canadian official was even more explicit, saying supply management was “not on the table” and Canada’s dairy system would remain protected.
That leaves another key question unresolved: how Canada can preserve supply management while giving U.S. farmers the additional access Trump says they will get.
What does Canada get?
Canada has not publicly detailed what tariff relief Washington has offered.
But the senior Canadian official said the emerging agreement would protect a significant number of jobs and preserve Canada’s favorable access to the U.S. market.
The official also said the agreement would allow Canada to focus more on its domestic economic agenda, including infrastructure projects, attracting foreign investment and diversifying exports beyond the United States.
Trump raised the pros
pect of reviving Keystone XL
In the Truth Social post announcing the three-day tariff pause, Trump declared that the long-canceled Keystone XL pipeline “may be awoken from the grave.” He did not say whether reviving Keystone XL was part of the agreement.
Keystone XL was designed to carry up to 830,000 barrels of crude a day from Canada’s oil sands to Nebraska and onward to U.S. Gulf Coast refineries. The project became a major political and environmental fight: President Barack Obama rejected it in 2015, Trump revived it in his first term and President Joe Biden canceled its permit in 2021. The Canadian company behind it later abandoned the project.
Carney had already raised reviving Keystone XL with Trump at the White House in October 2025, and Trump was receptive, according to a Canadian government official familiar with the discussion. A revival would align with a longstanding Canadian goal rather than amount to a new U.S. concession.
Carney did not mention the pipeline in his latest statement or detail what Canada had agreed to in the broader trade talks.
Both sides wrangle over American alcohol imports
Eight of Canada’s 10 provinces restrict or ban U.S. alcohol — measures imposed in retaliation for Trump’s previous tariffs on a number of Canadian goods last year and amid anger over his repeated talk of making Canada the 51st U.S. state. The Distilled Spirits Council says U.S. spirits exports to Canada have fallen more than 70%.
Ontario, Canada’s most populous province, is especially important. Its government-run LCBO, one of the world’s largest alcohol purchasers, sold nearly $1 billion Canadian dollars ($723 million) in U.S. products annually before pulling them from shelves.
The White House says the emerging deal includes a Canadian commitment to address the restrictions. But Carney cannot order provinces to restore sales. And other provincial leaders could resist if the broader deal falls short of their priorities.
The backlash extends beyond liquor stores, with Canadian travel to the United States falling sharply. Even if U.S. alcohol returns, sales could take time to recover.
An agreement could clear the way for a broader trade deal
The U.S. is renegotiating a North American trade pact — the US-Mexico-Canada Agreement — that Trump strong-armed America's neighbors into accepting in his first term. The U.S. has begun formal USMCA negotiations with Mexico but not with Canada.
The senior Canadian official said resolving the immediate tariff dispute would provide a path toward broader USMCA negotiations.
If the threat of 50% tariffs is cleared, it "should help pave the way for formal U.S.-Canada negotiations,'' said Wendy Cutler, a former U.S. trade negotiator who is now senior vice president the Asia Society Policy Institute.
Both countries had incentives to head off an escalation in trade tensions.
Nearly 72% of Canada’s goods exports last year went to the United States. And the Trump administration might be wary of imposing a hefty new tariff — paid by U.S. importers who try to pass along the cost to consumers via higher prices — ahead of November’s midterm elections. American voters are already frustrated with the high cost of living.
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Gillies reported from Toronto.
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