Trade War Averted as Canada and U.S. Reach 11th-Hour Deal
An eleventh-hour compromise between Canada and the United States has put a pending trade war on pause. Prime Minister Justin Trudeau and U.S. President Donald Trump reached a deal to ease tensions over looming tariffs late Monday afternoon, heading off punishing tariffs by both nations set to begin on Tuesday.
After phone calls between the two leaders, Trump agreed to delay the implementation of 25 percent tariffs on Canadian goods for at least 30 days. In return, Canada has pledged to bolster border security, designate Mexican cartels as terrorist organizations, and collaborate more closely with U.S. law enforcement to combat organized crime and money laundering.
The agreement provides a temporary reprieve from a brewing conflict that had already sent shockwaves through financial markets. Both the New York Stock Exchange and the Toronto Stock Exchange saw sharp early declines, though they partially recovered as hints of a potential compromise emerged. The TSX still ended the day down nearly 300 points.
While the deal eases immediate tensions, Trump has signaled that his administration will continue to push for changes in trade relations with Canada. Notably, he raised concerns about U.S. banks operating in Canada—a request that surprised observers, given that 16 American banks already conduct business in Canada.
Trump also took to social media to vent frustration over Canada’s negotiating toughness while reiterating his long-held, though politically unrealistic, desire to see Canada become part of the United States.
Beyond trade, both nations stand to see mutual benefits in enhanced border security. While the U.S. aims to curb the flow of drugs crossing south, Canada is looking to reduce the influx of illegal firearms from its southern neighbour.
The compromise also involved talks with Mexican President Claudio Pardo, who agreed to similar security measures in exchange for a reprieve from U.S. tariffs.
While tensions have eased for now, the temporary nature of the agreement leaves uncertainty over the long-term trajectory of Canada-U.S. trade relations.
