Donald Trump expected to hike tariffs on Canadian goods if no trade deal reached by midnight
White House press secretary Karoline Leavitt said Thursday afternoon that Trump would sign orders in the afternoon or evening, and that countries which had yet to strike a deal would hear from the Trump administration about the planned increases by midnight.
'Yes, tomorrow, Aug. 1, the reciprocal rates will be going into effect,' Leavitt said. 'If more deals are cut between now and midnight, we'll see what happens. I do know foreign leaders are ringing his phone, realizing this deadline is a real thing for them tomorrow, and they're bringing offers to the table.'
Dominic LeBlanc, Prime Minister Mark Carney's cabinet lead on Canada-U.S. trade, Carney's chief of staff Marc-Andre Blanchard, and Kirsten Hillman, Canada's ambassador to the U.S., are currently in Washington attempting to strike a deal.
A failure to do so means Trump will likely fulfil his threats to increase tariffs on Canadian goods that don't comply with the Canada-U.S.-Mexico Agreement (CUSMA) from 25 per cent to 35 per cent.
Trump said Thursday that he had initiated a 90-day negotiating period with Mexico following a call with Mexican President Claudia Sheinbaum, and that Mexican imports would continue to be subject to a 25 per cent tariff, along with a 25 per cent tariff on autos and a 50 per cent tariff on steel, aluminum and copper.
But the gulf between Canada and its largest trading partner appeared to widen early Thursday morning, when Trump warned that Canada's plan to recognize a state of Palestine had marred trade talks with Ottawa on the eve of his deadline to strike a trade deal.
'Wow! Canada has just announced that it is backing statehood for Palestine. That will make it very hard for us to make a Trade Deal with them. Oh' Canada!!!,' Trump posted on his Truth Social account shortly after midnight.
Carney said Wednesday that Canada intends to recognize a Palestinian state in September, a pledge that is contingent on the Palestinian Authority, the governing body in the occupied West Bank, agreeing to a series of democratic reforms. The reforms include holding general elections in 2026, in which Hamas can have no role, and ensuring that a Palestinian state is demilitarized. The prime minister said Palestinian Authority President Mahmoud Abbas had agreed to the conditions.
The announcement, which followed similar declarations from France and the United Kingdom, deepened the divide between Canada and Trump, a key ally to Israel.
Trump's penchant for throwing last-minute wrenches into the works — particularly when they're not trade-related — is unprecedented, said veteran trade lawyer John Boscariol.
'Trump is not using tariffs strictly for trade purposes but instead to achieve all these other objectives, and he moves the goalposts,' said Boscariol, head of the trade law group at the law firm McCarthy Tetrault.
Trump's late-night musing about Canada's potential recognition of a Palestinian state was reminiscent of his reference to the prosecution of former Brazilian president Jair Bolsonaro in his tariff letter to Brazil.
'This makes it much more challenging for Canada's negotiators,' Boscariol said, warning that just because Mexico got an extension of the Aug. 1 deadline doesn't mean Canada will.
'Mexico has its own issues with fentanyl and other illegal narcotics,' Boscariol said. 'But on the Canadian side, Trump is not happy with our supply management program, dairy in particular, and so I think Canada does have unique issues that could cause us to have a different outcome.'
The CEO of Canada's Automotive Parts Manufacturers' Association dismissed Trump's social media posting as a distraction tactic rather than a real negotiating stance. 'The White House is firing a confetti canon of grievances around the world, mostly likely to distract from domestic problems for Trump,' said Flavio Volpe.
Volpe said he expects the CUSMA tariff exemptions to continue whether there's a deal or not, because they serve U.S. interests.
'The CUSMA exemptions are there because the Americans need them. We did some hard work early in this trade war to show them that,' Volpe said.
At a Wednesday news conference in Ottawa, Carney said it was possible trade talks would continue past Thursday's midnight deadline.
While he framed the ongoing negotiations as 'constructive' and 'complex,' he suggested that U.S. tariffs on key sectors like autos, steel and aluminum will likely remain in place, given Trump's view that such measures are necessary for the national security of the United States.
With files from Mark Ramzy and Alex Ballingall
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