Trump pauses 50% tariffs on Canada after last-minute deal

Trump paused 50 percent tariffs on $20 billion of Canadian imports for three days after a last-minute deal.

Trump paused 50 percent tariffs on $20 billion of Canadian imports Tuesday night, hours before they were set to take effect, after the two countries reached a deal pending final documents.

"I have paused the 50% Tariffs against Canada, that were scheduled to kick in tomorrow morning for a three day period, based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!" Trump said on Truth Social.

The duties, set to hit at 12:01 am Wednesday, would have been the first-ever use of Section 338 of the US Tariff Act of 1930, targeting about 5 percent of Canadian exports including hockey sticks, tongue depressors, building materials, liquors and certain clothing. Trump also referenced the Keystone XL Pipeline, which he said "may be awoken from the grave."

The pause gives Washington and Ottawa three days to finalize terms in a dispute that threatened to escalate into a full trade war between partners who exchanged about $880 billion in goods and services last year. Nearly 72 percent of Canada's goods exports go to the US, while 330,000 people and $2 billion worth of goods cross the shared border daily.

Canadian Prime Minister Mark Carney's office did not immediately respond to a request for comment on the deal. Carney had described the talks Monday as "very delicate and intense," and he and Trump spoke twice by phone in the past two days, including again Tuesday afternoon.

The threatened duties stemmed from Trump's accusation that Ottawa discriminates against US exports including autos, alcohol and cheese. US Trade Representative Jamieson Greer said last week the policy basis was payback for Canada's retaliation against prior tranches of Trump's tariffs.

"I've got two countries in the world that have retaliated against the United States for trade measures: the People's Republic of China and Canada," Greer said. "That's not the kind of company you really want to be running in."

The US Chamber of Commerce warned Tuesday that without a deal, "the introduction of higher tariffs would damage both economies, drive up costs for U.S. families, further disrupt critical supply chains, and risk the 13 million American jobs that depend on" the US-Mexico-Canada Agreement.

In negotiations, Canadian officials sought to have the Section 338 tariffs scrapped entirely and pushed for lower Section 232 tariffs on industrial products such as steel and aluminum. A sticking point Monday and Tuesday was a request for lower automobile duties, with US officials unwilling to cut current 25 percent tariffs on that sector below 15 percent, according to Bloomberg and Reuters.

Washington has also sought greater Canadian purchases of US military equipment, participation in its "Golden Dome" missile defense system and access to critical minerals. The talks run alongside broader negotiations over the USMCA, the North American trade pact governing commerce among the three countries.

The last time Trump escalated tariffs against Canada, in 2025, he briefly halted trade talks after Ontario ran a television ad during the MLB World Series criticizing his trade policy. The Supreme Court later ruled his tariff authority overstepped legal bounds, striking down the duties and setting up refunds for importers.

Trump has since rebuilt his tariff wall through other legal avenues, including last month's 10 percent to 12.5 percent import taxes on 59 countries and the European Union, citing forced-labor allegations. The Canada pause shows the administration remains willing to negotiate bilaterally even as it broadens its tariff campaign.

The pause removes an immediate overhang for trade-exposed sectors on both sides of the border, including manufacturing, automotive, agriculture and energy. US importers reliant on Canadian supply chains stand to benefit from the reprieve, though the three-day window leaves uncertainty unresolved.

If the window closes without finalized documents, the 50 percent duties would snap back into effect, hitting roughly $20 billion in annual trade flows. That outcome would raise costs for US importers of Canadian goods and likely trigger the retaliatory measures Ottawa had threatened, reopening a dispute that has already strained relations between the two neighbors.

This article is for informational purposes only and does not constitute investment advice.