US and Canada Negotiating Relief on Steel and Auto Tariffs, Sources Say, as Trump Promises Deal 'Pretty Soon'

Since US-Canada trade talks broke down in August, the two governments have traded rounds of tariffs. Now they are working on a way out, at least on metals and cars. Two US and four Canadian sources told Reuters today, Oct. 26, that negotiators are discussing relief from Section 232 duties, including a tariff of up to 50% on Canadian steel and 25% on autos. The sources spoke anonymously because the talks are private.

Lutnick, not the trade office, is at the table

Section 232 tariffs are run by the Commerce Department. That puts Commerce Secretary Howard Lutnick, not the US Trade Representative's office, at the center of the talks, sources on both sides of the border told Reuters. One source said Lutnick and Canada's Dominic LeBlanc, the minister responsible for Canada-US trade, have been in regular contact.

LeBlanc's office confirmed only that the channel is open. "Canada remains in constructive dialogue with our U.S. counterparts on a range of priorities," a spokesperson said, adding that Canada is ready to work "in good faith towards a more mutually beneficial trading relationship that respects Canada's interests."

The White House, the Commerce Department and the USTR's office did not immediately respond to requests for comment.

Trump says soon. Sources say not so fast.

President Trump told a campaign rally in Port Huron, Michigan, on Sunday, Oct. 25, that a deal would come "pretty soon." "They're willing to give us anything at this moment," he said. Port Huron sits on the US-Canada border and has been hit hard by the tariff fight. Trump again accused Canada of ripping off the United States for years.

The sources offer a less tidy picture. One Canadian source said a steel and auto deal was possible before the Nov. 3 elections. US sources said the administration wants further concessions from Canada.

A Canadian industry source said any deal could come fast, but might be narrow. "If it happens, it'll happen fast. But my sense is it'll be a narrowed deal, if it even happens," the source said. Another Canadian source said they have believed for some time that a Section 232 deal is likely before the midterms, and that any agreement would be driven by Trump and Prime Minister Mark Carney.

Carney has said he wants a good deal for Canada.

What broke in August, and what it has cost

The August talks collapsed over issues including whether to cut duties on medium- and heavy-duty vehicles, which matter to Canadian factories. US automakers had hoped the talks would bring relief from the original 25% tariffs that have raised the cost of moving vehicles and parts across the border.

The tariffs Trump imposed after the breakdown covered roughly $20 billion in goods, from hockey sticks to cement. Canada answered with tolls on an equivalent amount of American products. Trump then retaliated with another round of levies of as much as 50% on certain goods.

On Friday, Oct. 23, the White House removed some of those duties after Maine Republican Sen. Susan Collins asked for relief. Maine has been disproportionately affected by the trade war. Democrats are targeting Collins' seat in their bid to take the Senate.

The political pressure

Reuters reports that Trump faces record-low approval ratings and that Republicans risk losing control of Congress. Republican candidates in border states have been calling for an end to the trade war with Canada. Market commentary from Investing Live notes that Michigan Republican Senate candidate Mike Rogers is now running against tariffs.

The same commentary urged caution, saying false reports of a US-Canada deal have been frequent and that this one should be taken "with a grain of salt." It also describes a scheduled increase to 50% on Canadian autos and steel from Jan. 1. That date has not been confirmed by either government in the material reported today.

A market analysis from Newsquawk makes a similar point. It says relief in past US-Canada episodes has tended to come as product-specific exemptions or quota arrangements, and that earlier reports of progress have been walked back. The difference between a full exemption and a tariff-rate quota would determine how much Canadian steel stays dutiable.

Neither government has announced terms, and neither has confirmed that a deal is close. The next test is the calendar: the elections are Nov. 3, a week from tomorrow. If the Canadian source is right, any agreement would have to arrive in that window. If the US sources are right, it depends on what Ottawa is willing to add.