Trump pauses 50% Canada tariffs in last-minute deal, eyes Keystone XL revival

With minutes to spare before a midnight deadline, the United States and Canada announced they had struck a deal to postpone a sweeping round of tariffs that would have hammered Canadian exporters. President Donald Trump made the announcement on Truth Social on Tuesday evening, confirming that a 50-percent duty on roughly $20.2 billion worth of Canadian goods would be suspended until August 22. Prime Minister Mark Carney confirmed the pause shortly after, describing the talks as intense but productive.

The tariffs would have struck across a broad swath of the Canadian economy—electronics, industrial machinery, furniture, dairy products, and wine among them. For Canadian exporters, the stakes were existential. Roughly 70 percent of all Canadian exports flow to the United States, making the American market the lifeblood of the country's trade economy. By contrast, only about 30 percent of US exports go to Canada. The asymmetry meant that while American consumers might eventually feel the sting of higher prices, Canadian workers and businesses faced immediate, severe disruption.

Trump had invoked Section 338 of the Tariff Act of 1930—a rarely used provision—to impose the duties last month, citing what he called Ottawa's discriminatory treatment of American automobiles, dairy products, and alcoholic beverages. The move was notable because it targeted goods that had enjoyed duty-free status under the United States-Mexico-Canada Agreement, the three-way trade pact ratified during Trump's first term. For years, that agreement had shielded the vast majority of US-Canadian trade from tariffs. Now Trump was dismantling those protections.

The breakthrough came after Trump and Carney held talks on Tuesday aimed at finding common ground. Though neither leader disclosed specifics of the agreement, Trump appeared to link the pause to his ambition to resurrect the Keystone XL Pipeline—a project that would transport roughly 830,000 barrels of crude oil daily from Alberta to Nebraska. Former President Joe Biden had revoked the key permit for the US portion of the pipeline in 2021 on environmental and economic grounds, effectively killing it. "The great Keystone XL Pipeline, long ago killed by Sleepy Joe Biden, may be awoken from the grave!" Trump declared. Andreas Schotter, an international business professor at Ivey Business School, suggested the pipeline's inclusion in negotiations was less about oil logistics and more about appealing to Trump's ego—a chance to undo one of Biden's signature environmental decisions.

Carney acknowledged that "substantial progress" had been made but cautioned that "important work still to be done" remained before the August 22 deadline. The Canadian government faced a complicated political landscape. Eight of Canada's ten provinces had imposed their own retaliatory bans on US-made alcoholic beverages since early last year, and provincial leaders had expressed reluctance to make concessions on the country's supply management system—the quota-based framework governing dairy, eggs, and poultry production that the Trump administration had repeatedly criticized. Carney had to navigate not just Washington's demands but also the concerns of provincial premiers who held leverage over any final agreement.

The Canadian public, meanwhile, showed little appetite for capitulation. A Nanos Research poll conducted in July found that 69 percent of Canadians said they would not buy US alcohol even if the provincial bans were lifted. An Angus Reid Institute survey released earlier in August showed that 48 percent of Canadians held an unfavorable view of Americans, compared with 45 percent who held a positive one. Stewart Prest, a political science lecturer at the University of British Columbia, noted that Canadians felt a strong sense of national pride and defiance. "The majority of Canadians want to see our sovereignty defended, and are not interested in trade peace at any price," Prest said. That public mood would constrain Carney's negotiating room as the clock ticked toward Friday.

The three-day pause offered a temporary reprieve, but the fundamental tensions remained unresolved. Trump had signaled that the Keystone XL Pipeline was now part of the equation—a linkage that suggested the tariff dispute was really about something larger than trade balances or market access. Whether the two countries could bridge their differences by August 22 remained an open question. As Schotter put it, the question was whether they would reach a real deal by Friday or find themselves back in a cycle of brinkmanship and last-minute negotiations.