Donald Trump optimistic about resolving trade war with Canada

President Donald Trump said a trade deal with Canada could happen soon, framing the northern neighbor as desperate to reach an agreement while simultaneously presiding over one of the most aggressive tariff escalations between the two countries in modern history.

Trump made the remarks on September 12 during a meeting with Irish Prime Minister Micheal Martin in Dublin, calling out Canadian tariffs on US farmers and claiming that Ottawa wants a deal “very badly.”

The tariff timeline

The current standoff traces back to a near-agreement in mid-August that collapsed at the last minute.

The US responded to the breakdown by slapping 50% tariffs on roughly $20 billion worth of Canadian goods, hitting sectors like dairy, alcohol, steel, aluminum, and automotive parts.

Canada didn’t sit quietly. Ottawa enacted retaliatory tariffs ranging from 15% to 50% on approximately $20 billion in US exports, which took effect on September 8. Four days later, Trump was in Dublin talking about how close a deal might be.

Trump has also invoked Section 338 measures, authorizing outright import bans on specific Canadian industries. Those bans are set to kick in on September 29.

The tariffs currently in play affect about 5% of bilateral goods trade between the two countries.

A pattern of brinkmanship

Since returning to office in early 2025, Trump has reignited trade grievances centered on Canadian protections for its dairy industry, restrictions on US agricultural imports, and what the administration views as unfair subsidies in the automotive sector.

Canadian Prime Minister Mark Carney has maintained that negotiations are ongoing, though both sides have traded blame for the August breakdown. Neither side has been fully transparent about what specifically derailed the talks.

The USMCA trade agreement is now approaching a scheduled review, which adds another dimension of uncertainty to the current dispute.

What this means for markets

The sectors most directly exposed to the tariff crossfire are agriculture, automotive, steel, and aluminum. Automotive manufacturers face a particular challenge, as modern car production involves parts crossing the US-Canada border multiple times before a vehicle is finished, meaning a 50% tariff on components fundamentally changes the economics of where production occurs.

The September 29 deadline for US import bans on certain Canadian industries adds a hard clock to the negotiations. If those bans take effect, the dispute moves from tariff territory into something more severe, potentially triggering a new round of Canadian retaliation.

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