Donald Trump says Canada is working hard for an agreement and that Washington holds every advantage. Mark Carney says Ottawa could sign one this afternoon. With American midterms days away and formal talks still suspended since August, both capitals are now negotiating in public rather than at the table.
By the Canada Trade Desk | Peacock Tariff Consulting
OTTAWA, October 25, 2026 – The most detailed public statements in weeks about the state of Canada United States trade negotiations arrived this week not from a negotiating room but from a scrum with reporters in Washington and a press conference in Istanbul, and they described two quite different situations.
Speaking to reporters on October 23, President Donald Trump said Canada is working very hard to make a deal with the United States, and that, in his words, we have all the cards. In the same exchange he described the administration as very close to a very good agreement, though that remark referred to Mexico rather than Canada.
Hours later and five thousand miles away, Prime Minister Mark Carney told reporters in Istanbul that Canada is continuing to engage with the United States government and that an agreement could be concluded immediately if Washington were prepared. Canada, he said, could sign it this afternoon if the United States were there. On timing, he said the decision rests with the United States, which he described as a little hard to predict.
Both statements were delivered on the same day the White House issued a proclamation reshuffling the Section 338 tariff annexes, and ten days before American voters go to the polls in midterm elections that have made the trade dispute with Canada a live campaign issue in several northern states.
Where Things Actually Stand
Formal negotiations between the two governments collapsed in August. The breakdown was followed by the imposition of 50 percent duties under Section 338 of the Tariff Act of 1930 on a broad range of Canadian goods, and by Canadian retaliatory surtaxes covering roughly 27.6 billion dollars of United States imports that took effect on September 8.
Since then the process has been opaque. Canada’s chief negotiator has said publicly that there is no timeline for resuming formal talks, and Ottawa’s position has been that it will return to the table when appropriate. What contact there has been appears to have run at leader level and through intermittent official channels rather than through a structured negotiating process.
Carney confirmed this week that he had spoken with Trump by telephone on Wednesday, and that the conversation ran, in his description, for quite some time. He reported no breakthrough. Separately, Carney’s advisory committee on Canada United States economic relations convened for the first time in more than six weeks, a signal that Ottawa is at minimum preparing for the possibility of renewed engagement.
The office of Trade Minister Dominic LeBlanc, responding to the October 23 tariff proclamation, said Canada would assess the new measures and that the government stands ready to work constructively and in good faith toward a better trade relationship.
Canadian officials have not ruled out the possibility of a rapid agreement before the American vote, according to reporting by CTV News, though the same reporting characterized expectations in Ottawa as faint.
The Midterm Variable
The electoral calendar is the single largest short term factor shaping this negotiation, and it is pulling in contradictory directions.
The trade war has become a ballot box issue in states with heavy cross border exposure. Agricultural producers, manufacturers and retailers in the northern tier have absorbed cost increases from both American duties and Canadian counter surtaxes, and Democratic candidates have made the resulting price pressure a campaign theme.
The administration’s response has been targeted relief. Senator Susan Collins of Maine announced on October 23 that she had secured exemptions covering nine categories of Canadian imports used by agricultural businesses in her state, including packaging materials, refrigeration and freezing equipment, produce handling machinery, certain films and sheets, and seaweed and algae for human consumption. The beneficiaries she identified are Maine’s wild blueberry, potato, apple and seaweed producers.
In a statement reported by Newsweek, Collins said those producers are a vital part of the state’s economy and support rural and coastal communities, and that businesses depend on Canadian products that are either unavailable from American suppliers or cannot be replaced without incurring significant expense. She said she had pressed the case with United States Trade Representative Jamieson Greer and Treasury Secretary Howard Lutnick, and she used the occasion to argue for a comprehensive agreement with Canada.
Collins faces Democrat Troy Jackson in a contest that public polling has shown to be effectively tied.
CTV political analyst Eric Ham described the exemption package as being entirely about politics and as a lifeline for Republican candidates in the final stretch of the campaign.
The contradictory pull is this. Targeted relief reduces the domestic political cost of maintaining the tariffs, which weakens the incentive to conclude a comprehensive agreement quickly. At the same time, the visible electoral salience of the dispute creates pressure for a headline deal that could be announced before the vote. Which of those forces dominates is the question Ottawa cannot answer from outside.
A Diplomatic Irritant
The negotiating atmosphere was complicated further this month by an accusation from the United States Embassy in Ottawa that Canadian politicians were attempting to influence the American midterm elections. The embassy named Industry Minister Melanie Joly and Ontario Premier Doug Ford.
Both rejected the allegation. Independent analysts were similarly dismissive. Daniel Beland, a political scientist at McGill University, described the proposition that Canada could meaningfully sway the American midterms as absurd, in comments reported by Euronews.
The episode is minor in substance but telling in tone. Public accusations between an embassy and a host government’s ministers are not the ordinary furniture of a negotiation that either side expects to conclude within weeks.
What Canada Wants
Ottawa’s objectives have been reasonably consistent since the summer, even as its tactics have shifted.
The central ask is removal or substantial reduction of the Section 232 duties, which run at 25 percent on automobiles, trucks and parts, between 10 and 50 percent on steel, aluminum, copper and derivatives, 10 percent on softwood lumber, 25 percent on upholstered furniture, cabinets, vanities and certain semiconductors, and 10 percent on buses. These are the measures with the largest industrial footprint, and unlike the Section 301 tariff of 10 percent imposed in July, they carry no exemption for goods originating under CUSMA.
Section 338 is the newer irritant and the more legally contested one. The measure was challenged in the United States Court of International Trade in October by an American food importer, the first such case, and trade counsel have noted that the provision is essentially untested in modern litigation. Ottawa has an interest in the outcome but no role in the proceeding.
Beyond tariff removal, Canada has sought predictability. Three revisions to the Section 338 annexes in roughly two months have made coverage unstable, and Canadian industry associations have argued that the planning cost of that volatility rivals the duty cost itself.
Running underneath all of it is the CUSMA joint review. The United States declined to extend the agreement at the 2026 review, which triggers a cycle of annual reviews rather than the sixteen year renewal the treaty contemplated. The agreement remains in force, but its long horizon has been replaced by a short one, and that shortened horizon affects investment decisions independently of any tariff.
What Canada Is Doing Instead
While talks remain suspended, Ottawa has been executing a parallel strategy that does not depend on American agreement.
The most visible element is domestic industrial support. On October 21, Carney and Ford announced a joint federal and Ontario package valued at roughly 8.7 billion Canadian dollars, directed at steel, automotive and critical minerals. The steel component, a joint action fund, carries commitments of approximately 5.22 billion dollars over five years, split between 3.55 billion federal and 1.67 billion provincial. Automotive capital support accounts for about 2.5 billion over two years, and Ring of Fire critical minerals infrastructure for up to 1 billion over three years. The federal government has said the measures protect roughly 220,000 jobs in steel, automotive and related industries, with a further 70,000 tied to the critical minerals corridor.
The package does not remove a single American tariff, a limitation its authors have acknowledged.
The second element is diversification. Carney has set a target of doubling Canada’s non United States exports within a decade, arguing that American priorities have shifted and that Canadian policy must shift with them. He has said that United States tariffs have upended a trade bargain that existed for decades, and that the measures make both countries’ industries weaker while reducing choice for families on both sides of the border.
Ford, speaking alongside him, framed the change as permanent, saying Canada will not return to the previous relationship regardless of the midterm outcome or who occupies the White House.
That is a significant statement from a premier whose province carries the largest absolute exposure to the American market, and it reflects a judgment now reasonably widespread in Ottawa and Queen’s Park: that even a favourable agreement would not restore the pre 2025 baseline, because the demonstrated willingness to use tariffs has itself become a permanent feature of the planning environment.
The Economics Of Waiting
Delay is not neutral. Modelled estimates published in August put the direct employment effect of the Section 338 measures at roughly 52,000 jobs in affected sectors, rising to between 87,000 and 90,000 once indirect effects are counted. Real GDP growth was estimated to be reduced by 0.2 to 0.3 percentage points, with consumer price inflation up by 0.2 to 0.5 points.
Observed data tracks the same direction. Canadian automotive exports to the United States have fallen by more than 10 percent, and American exports to Canada by more than 20 percent. Canadian steel exports to the United States ran at approximately 4.6 billion United States dollars last year, down from roughly 7 billion in 2024 before the expanded duties.
Layoffs have followed. Cleveland Cliffs confirmed job reductions at its Hamilton, Ontario operation on the same day the federal and provincial support package was announced, a juxtaposition that underlined the limits of subsidy as a substitute for market access.
Each month without an agreement also hardens the structural position. Buyers who requalify suppliers outside Canada do not automatically return. Canadian producers who redirect capacity toward domestic or non American markets build relationships that outlast the tariff. The cost of delay compounds in ways that a subsequent agreement cannot fully reverse.
What An Agreement Might Look Like
Neither government has published terms, and the substance of the near final deal that collapsed in August has not been made public in detail. What can be inferred from the shape of the dispute is that any agreement would need to address Section 232 coverage on steel, aluminum and automobiles, the status of the Section 338 measures, and Canada’s counter surtaxes, which Ottawa has consistently framed as responsive rather than independent.
Supply managed agriculture remains the most politically constrained file on the Canadian side. Dairy and poultry tariff rate quotas have been a standing American grievance across multiple administrations, and Canadian governments of both parties have treated the supply management system as substantially off limits. Any agreement that touched it would face domestic resistance disproportionate to the trade value involved.
On the American side, the CUSMA annual review cycle provides a mechanism for staged commitments rather than a single comprehensive settlement, and some trade practitioners have suggested that a narrower sectoral arrangement, covering automotive or steel alone, is more plausible in the near term than a general agreement.
Glasgow, the trade lawyer cited by CTV News, assessed a broader deal as unlikely within weeks.
Implications For Canadian Business
For exporters, the operating assumption through the end of the year should be continuity rather than resolution. The Section 338 annexes will likely be revised again. Section 232 rates are unlikely to move before the American vote, and plausibly not immediately after it. Canadian counter surtaxes remain in force, with relief available through the United States Surtax Remission Order and through discretionary applications under section 115 of the Customs Tariff.
Three practical points follow.
First, remission applications are underused. Firms importing American inputs with no reasonable domestic or third country substitute have a defined pathway, and the administrative burden is lower than most assume.
Second, the January 1, 2027 date now appearing in Canadian government materials as a possible trigger for higher American duties on vehicles and parts should be treated as a planning milestone, whether or not it materializes. Automotive suppliers in particular should model it.
Third, diversification support is being funded. The federal and Ontario programs announced on October 21 have not yet published eligibility criteria, application rules or disbursement schedules, and firms with exposure in steel, automotive or critical minerals should be positioned to apply when those details are released rather than beginning preparation afterward.
The Reading From Here
Two leaders described the same negotiation this week in incompatible terms. One said his counterpart is working hard for a deal and that he holds every advantage. The other said the agreement is ready and the delay belongs to Washington.
Both descriptions can be partially accurate. Canada has made clear it wants an agreement and has limited leverage to compel one. Washington has limited urgency and considerable discretion over timing. That is an asymmetry, and Trump’s characterization of it was not inaccurate, even if the conclusion Ottawa draws from it is not the one he intended.
Carney’s answer has been to reduce the asymmetry over time rather than to contest it now. Doubling non American exports within a decade is a statement about leverage in 2036, not about leverage this November. Whether that is the right trade for Canadian business depends considerably on how many Canadian businesses are still exporting when the decade is up.
Sector By Sector, What Is At Stake
A general agreement would not affect all Canadian industries equally, and the sectors with the most to gain are not necessarily those with the loudest representation.
Automotive carries the largest absolute exposure. Integrated continental supply chains mean components cross the border multiple times before final assembly, and a duty applied at each crossing compounds in a way that a simple tariff rate understates. Canadian automotive exports to the United States have already fallen by more than 10 percent, and American exports to Canada by more than 20 percent, figures that reflect disruption to a system that was engineered on the assumption of frictionless movement. A date of January 1, 2027 has appeared in Canadian government materials as a possible trigger for higher American duties on vehicles and parts, and suppliers are modelling it.
Steel and aluminum face the highest rates and the most direct substitution risk. Canadian steel exports to the United States ran at approximately 4.6 billion United States dollars last year, down from roughly 7 billion in 2024. Aluminum sits outside the Section 338 round because it already carries Section 232 duties, which is relief only in the narrowest sense.
Forestry occupies a more complicated position. Softwood lumber duties were reduced to 24.75 percent in October following an administrative review, a meaningful cut from prior levels though still a substantial barrier, and Ontario has pressed publicly for their complete elimination. The October 23 removal of plywood from the Section 338 list adds further relief for the panel segment. Forestry is accordingly the one major Canadian export sector where the trend line has recently been favourable, which has not stopped industry associations from emphasizing that the volatility itself remains the central problem.
Agriculture and food processing are affected asymmetrically. The packaging and equipment removals obtained through the Maine exemptions benefit American packers rather than Canadian producers directly, though they reduce the delivered cost of Canadian inputs into American supply chains. Dairy remains subject both to American duties and to the broader political dispute over supply management.
The Provincial Dimension
Canadian trade policy is formally federal, but the political management of this dispute has been substantially provincial, and that has shaped both the tone and the substance of Ottawa’s position.
Ontario carries the largest exposure and has been the most forward leaning. Ford’s participation in the October 21 support package, with Ontario contributing 1.67 billion dollars to the steel fund alone, reflects a provincial government that has chosen to co finance the response rather than demand it. His statement that Canada will not return to the previous relationship regardless of the American electoral outcome is a notable commitment from a jurisdiction whose prosperity has been built on integration.
British Columbia’s exposure runs through forestry and paper, which account for more than 13 percent of the province’s exports to the United States, and provincial advocacy has focused on softwood lumber duties rather than on the Section 338 measures.
Quebec is affected through aluminum, plastics, furniture and textiles. Alberta’s exposure is largely indirect, running through transportation and services, since energy has remained outside the principal tariff measures.
Those differing exposures produce differing priorities, and a federal negotiating position must reconcile them. A deal that removed automotive duties while leaving softwood lumber untouched would be received very differently in Windsor than in Prince George. The breadth of the current measures has so far obscured that tension by affecting everyone, but it would surface quickly in any partial settlement.
A Note On Precedent
It is worth recording how unusual the present situation is by historical standards. Canada and the United States have managed trade disputes continuously since before Confederation, and the postwar period produced regular friction over softwood lumber, dairy, wheat, magazines and energy. What distinguishes the current episode is not the existence of disagreement but the breadth of the measures and the speed with which coverage changes.
Previous disputes were typically sectoral, adjudicated through established mechanisms, and resolved over years through negotiated settlements that both sides treated as binding. The current measures span most of the goods economy, rest on statutory authorities that bypass the adjudicative route, and are revised by proclamation on a timescale of weeks.
That difference explains why Canadian business responses have shifted from dispute management toward structural adjustment. A sectoral dispute is something a firm waits out. A general and rapidly mutable tariff environment is something a firm reorganizes around, and reorganization is harder to reverse than waiting.