Washington’s settlement offer excludes softwood lumber relief and demands the immediate return of American alcohol to provincial shelves, sources say, leaving the two sides far apart days before new tariffs bite
By Peacock Tariff Consulting Trade Desk | OTTAWA, August 15, 2026
The shape of a possible Canada-United States trade deal came into focus Friday, and for two of Canada’s most sensitive industries the picture is bleak. With only days remaining before new American tariffs of 50 percent take effect against a broad slate of Canadian goods, CTV News reported that the American proposals on the table contain no significant reduction of softwood lumber duties and would require American alcohol to return to provincial store shelves immediately upon signature. In exchange, Washington is offering to reduce the Section 232 national security tariffs that have battered Canada’s automotive, steel, and aluminum sectors since the trade conflict began.
The reporting, based on conversations with one American official and five Canadian officials briefed on the negotiations, provides the most detailed public accounting yet of the bargain being discussed in Washington. It also explains why, according to two of those sources, the two countries remain quite far apart despite an intensive week of meetings between Canada-United States Trade Minister Dominic LeBlanc, chief trade negotiator Janice Charette, and United States Trade Representative Jamieson Greer. The Canadian side, the sources said, does not believe the proposed Section 232 reductions go far enough to justify what Washington is asking Canada to surrender.
Lumber Pushed Off the Table
The exclusion of softwood lumber from the negotiating package will land hardest in British Columbia, Quebec, and the forestry towns of northern Ontario and Alberta. According to the American source cited by CTV News, Washington considers the softwood lumber dispute a long-standing issue that predates the current trade discussions and therefore falls outside the purview of these negotiations. The source indicated the United States is not closed to future talks on lumber, just not now.
That position consigns Canadian lumber producers to a punishing status quo. Canadian softwood shipments to the United States currently face combined anti-dumping and countervailing duties of about 35 percent, following an increase last year that the Forest Products Association of Canada said dealt a further blow to an industry already operating below capacity amid curtailments and mill closures. A preliminary determination from the United States Department of Commerce earlier this year pointed to a reduced combined rate of 24.83 percent, according to trade data firm IndexBox, but that relief only arrives if confirmed in a final determination expected in late August, and it would still leave duties at historically elevated levels.
Market conditions compound the pressure. Lumber futures slid below 580 United States dollars per thousand board feet on August 12, drifting toward a three-month low as weak American housing demand and persistent trade uncertainty weighed on prices. For producers, the combination of soft prices and high duties is squeezing margins from both directions, and the news that lumber will not feature in any imminent deal removes the nearest source of potential relief.
British Columbia Premier David Eby erupted at the reported American position on Friday. The softwood lumber industry is under direct attack, Eby told reporters, arguing that the sector is bigger than auto parts and steel combined in terms of the Canadian economy, and it needs to be front and centre at the table. Eby also repeated his refusal to return American alcohol to British Columbia shelves, saying his position is unchanged after previously declaring there was not a chance in hell of a reversal.
The Alcohol Demand
If lumber is the file Washington will not discuss, alcohol is the file it will not drop. The sources told CTV News that once a deal is struck, the United States wants to see the immediate return of American alcohol to provincial store shelves, and that the ban has been absolute top of mind for American officials throughout the trade war. Since early last year, eight of the ten provinces, all but Alberta and Saskatchewan, have removed American beer, wine, and spirits from their government-controlled retail systems in response to President Donald Trump’s tariff threats.
The provincial bans have become one of the most visible symbols of Canadian resistance, and their commercial effect on American distillers, brewers, and vintners has been significant, given that provincial liquor boards are among the largest alcohol buyers in the world. The White House has cited the bans, alongside Canada’s supply-managed dairy system and quotas on certain American vehicles, as the formal justification for the new 50 percent tariffs proclaimed under Section 338 of the Tariff Act of 1930.
The demand puts Prime Minister Mark Carney’s government in a constitutionally awkward spot. Alcohol retailing is provincial jurisdiction, and Ottawa cannot simply order the products back onto shelves. Ontario Premier Doug Ford signalled conditional openness this week, saying he would consider restoring American alcohol if a fair deal protects Canadian steel, aluminum, auto, forestry, agricultural, and manufacturing sectors. But Eby’s flat refusal illustrates the coordination problem: any commitment Ottawa makes on alcohol depends on ten provincial governments with divergent economic stakes and political incentives.
What Washington Is Offering
The American offer centres on the Section 232 tariffs that have applied to Canadian steel, aluminum, automobiles, and related products on national security grounds. Reducing those duties would deliver real relief to Ontario’s integrated auto corridor and to steel and aluminum producers in Ontario, Quebec, and British Columbia, industries that have absorbed billions of dollars in tariff costs and watched investment decisions drift south as a result.
Yet the Canadian assessment, according to the sources, is that the proposed reductions do not go far enough. The sources did not specify the offered rates, but the structure of the trade suggests why Ottawa is hesitating. Canada would be trading concrete, immediate, and politically expensive concessions, restoring American alcohol, softening auto quotas, and removing its own counter-tariffs on American vehicles, for partial relief on duties that Washington could reimpose by proclamation at any time. The United States has also asked Canada to remove its counter-tariffs on American autos, which Ottawa imposed in response to the Section 232 measures on Canadian cars and trucks.
There is a sequencing risk as well. According to the sources, if negotiators reach an agreement, Greer will place it on the president’s desk as early as Monday, and Greer has communicated to multiple officials that everything will hinge on the mood of the president when the deal is presented. For Canadian planners, that means even a completed negotiation carries execution risk until the president signs.
A Deadline With Real Teeth
The backdrop to all of this is the August 19 effective date for the new Section 338 tariffs. The duties would apply at 50 percent to an estimated 28 billion dollars in Canadian exports by one measure cited by BNN Bloomberg, with The Canadian Press placing the figure at nearly 20 billion United States dollars, covering categories from dairy and alcoholic beverages to motor vehicles, honey, cement, wood products, apparel, and sporting goods. Energy, potash, fish, and critical minerals are excluded. Economists cited by BNN Bloomberg estimate the covered goods represent about five percent of Canada’s exports to the United States.
Crucially, the new duties contain no exemption for CUSMA-compliant goods. That distinguishes them from earlier rounds, in which certification under the continental trade agreement shielded the bulk of Canadian shipments. Companies that spent the past eighteen months certifying supply chains would find that work worthless for covered products, at least until a settlement restores preferential treatment.
LeBlanc and Charette briefed provincial and territorial trade ministers and the prime minister’s Advisory Committee on Canada-United States Economic Relations on Friday afternoon, and LeBlanc’s office confirmed the pair will remain in Washington through the weekend. Greer, for his part, described the talks as constructive but reiterated in Iowa on Friday that Canada would have to lift its retaliatory measures to avoid the new tariffs, comparing Canadian countermeasures to the kind of things that China would do.
Stakeholders Brace and Lobby
Industry reaction has split along sectoral lines that mirror the deal’s uneven geography. Automotive, steel, and aluminum groups have urged Ottawa to bank whatever Section 232 relief it can get, arguing that every month of 25 to 50 percent metal and vehicle duties does compounding damage to investment pipelines. Forestry groups have pushed in the opposite direction, warning that a deal that trades away Canada’s alcohol leverage while leaving lumber duties untouched would abandon one of the country’s largest resource sectors at its weakest moment in a decade.
Quebec Premier Christine Frechette convened an emergency meeting on trade and agriculture Thursday, warning that some industries could enter survival mode if the tariffs proceed. Her concern reflects Quebec’s twin exposure: the province anchors both the dairy system Washington wants opened and a forestry sector already reeling from duties and curtailments. Any deal that satisfies the American demands on dairy while ignoring lumber would strike Quebec twice.
The federal opposition has seized on the reported contours as evidence the government is negotiating from weakness. Trade experts counter that Canada’s alternatives are limited: the retaliatory measures Washington objects to are precisely the leverage Ottawa needs to extract Section 232 relief, and surrendering them without durable guarantees would leave Canada exposed to the next proclamation. It looks like it’s going to end in tears, one former Canadian diplomat told BNN Bloomberg this week, capturing the pessimism that has crept into expert commentary as the deadline approaches.
Analysis: The Asymmetry Problem
Strip away the personalities and the deal on the table reveals a structural asymmetry that has defined the entire trade war. The United States is offering to partially unwind measures it imposed unilaterally, in exchange for Canada permanently dismantling the countermeasures that constitute its only leverage. Washington gives back some of what it took; Canada gives up its means of response. That asymmetry is why the Canadian side keeps returning to the phrase that the reductions do not go far enough, and why negotiators are fighting for guarantees, sunset provisions, and dispute mechanisms rather than headline rate cuts alone.
The exclusion of softwood lumber illustrates the same logic. The lumber dispute is governed by anti-dumping and countervailing duty orders that operate on their own legal track, insulated from political negotiation by the machinery of American trade remedy law. By declaring lumber out of scope, Washington keeps its most durable pressure point intact while asking Canada to dissolve its own. Canadian negotiators understand this perfectly well, which is why British Columbia’s fury, however inconvenient for Ottawa, strengthens the federal hand by demonstrating that a lumber-free deal may be politically unsellable at home.
What Traders Should Do Now
For exporters in the covered categories, the operative assumption should be that the tariffs take effect Wednesday, with any deal arriving as a subsequent reprieve rather than a pre-deadline rescue. Goods that can clear United States customs before August 19 should be accelerated where commercially sensible. Contracts being negotiated now should include tariff-sharing clauses and force majeure language calibrated to Section 338 duties, and exporters should quantify their exposure under both the 50 percent scenario and a negotiated partial-relief scenario.
Lumber producers face a distinct calendar. The final determination on the revised duty rate, expected in the coming weeks, will set the sector’s cost base regardless of what happens in the broader negotiation. Producers should model cash flow at both the current combined rate near 35 percent and the preliminary reduced rate of 24.83 percent, while recognizing that neither figure is affected by the August 19 deadline. Importers of American alcohol, meanwhile, should watch the provincial boards: a deal could reopen listings quickly in some provinces, and suppliers who maintained relationships with the boards will move fastest when shelves reopen.
The weekend will tell. If LeBlanc and Charette emerge with a package, the president’s reaction early next week becomes the decisive variable. If they do not, Canadian trade policy enters uncharted territory on Wednesday morning, with the continental agreement’s protections suspended for a fifth of a trillion dollars in annual two-way trade and both governments reaching for their next round of leverage.
Four Decades of Lumber War
To understand why Washington can so casually rule lumber out of scope, it helps to recall that the softwood dispute is older than the modern trade relationship itself. The first American countervailing duty petition against Canadian lumber was filed in 1982, and the two countries have since cycled through five major rounds of litigation, two managed trade agreements, repeated victories for Canada at international tribunals, and repeated re-impositions of duties by the United States. The core American allegation has never changed: that Canadian provinces, which own most of the country’s forests, charge stumpage fees below market rates and thereby subsidize their producers. Canada has never accepted the premise, and panels under the old NAFTA and at the World Trade Organization have repeatedly sided with Ottawa on key points.
What has changed is the scale of the money at stake. American customs authorities have collected billions of dollars in duty deposits from Canadian producers since the current round began in 2017, cash that sits in escrow while litigation grinds forward and that Canadian companies carry as a drag on their balance sheets. The duties operate through annual administrative reviews, which is why the rate has bounced from roughly 8 percent in the early years to above 35 percent last year, and why the preliminary 24.83 percent figure for the current review offers only partial and delayed comfort. None of this machinery is touched by the negotiations underway in Washington this week, which is precisely the point Eby is making, however undiplomatically, from Victoria.
The industry meeting this moment is weaker than in past rounds. Years of curtailments, mill closures, and capacity migration to the American South have thinned the Canadian sector, and the Forest Products Association of Canada has warned that the combination of elevated duties and the broader tariff war has pushed many operations below sustainable utilization rates. Ottawa has extended support measures for affected workers and communities, but federal aid does not restore market access, and the provinces most affected have made clear they expect lumber to be part of any continental settlement worth signing.
The Section 232 Calculus
On the other side of the ledger, the Section 232 relief on offer is not trivial. The national security tariffs on steel, aluminum, automobiles, and derivative products have been among the most economically damaging measures of the entire conflict, because they strike the most integrated industries in the North American economy. A vehicle assembled in Ontario crosses the border multiple times in component form before completion, and each crossing has become a taxable event. Detroit’s automakers share the pain, which is why Reuters reported this week that they fear a CUSMA revamp could cost them billions, and why the auto lobby on both sides of the border quietly favours almost any deal that lowers the metal and vehicle duties.
Canadian steel and aluminum producers have similarly absorbed a brutal two years, losing American order books to domestic mills while facing surging import competition in their home market from steel diverted out of the United States by the global tariff wall. Ottawa responded with its own safeguard measures and with anti-dumping duties on Chinese steel, which in turn complicated Canada’s efforts to win tariff relief from Beijing on canola and other farm exports. Every file connects to every other file, which is one reason these negotiations resist the quick, clean resolution the deadline demands.
Reading the Numbers
The discrepancy between the estimates of trade coverage, nearly 20 billion United States dollars by The Canadian Press’s accounting and roughly 28 billion dollars in Canadian imports by the figure BNN Bloomberg cites, reflects currency denomination and methodological differences rather than disagreement about the scope of the order. Both figures point to the same conclusion: the Section 338 action covers about one-twentieth of Canada’s exports to the United States, concentrated in consumer goods, food and beverage, vehicles, and light manufacturing. That share may sound modest, but the covered sectors are labour-intensive, regionally concentrated, and disproportionately composed of small and mid-sized firms without the balance sheets to ride out a 50 percent duty.
The categories excluded, energy, potash, fish, and critical minerals, tell their own story about American priorities. Each is an input the United States economy cannot readily replace: Canadian crude feeds midwestern refineries, Saskatchewan potash underpins American agriculture, and critical minerals feed the defence and technology industrial base. The exclusions map almost perfectly onto American self-interest, which Canadian negotiators privately read as confirmation that the tariffs are designed to maximize Canadian pain at minimal American cost.
The Path to Wednesday
As the weekend opens, the mechanics of a deal are visible even if the will remains uncertain. A package would trade the restoration of American alcohol to provincial shelves, movement on auto quotas and counter-tariffs, and some accommodation on dairy administration for meaningful Section 232 reductions and suspension of the Section 338 proclamations. Lumber would be deferred to a separate track, with Ottawa extracting at most a commitment to negotiate. Whether such a package survives contact with ten premiers, the Bloc Quebecois, the dairy lobby, and the president’s Monday mood is the question on which 28 billion dollars of trade now rests.
Canadian businesses with exposure on either side of the ledger should treat the weekend as the last clear planning window. By Monday evening, the outlines of the outcome will likely be known. By Wednesday morning, it will be law, one way or the other.