Negotiators have sketched a tentative arrangement cutting Section 232 steel and aluminium duties to 25 per cent and auto tariffs to 15 per cent, but derivative products, exclusions and aluminium traceability remain unresolved
WASHINGTON, August 20, 2026
The most commercially significant element of the emerging Canada-United States trade arrangement is not the 50 per cent tariff that Washington shelved on Tuesday night. It is the set of sectoral duties that has been grinding away at Canadian metals and automotive exports for more than a year, and which negotiators spent Wednesday attempting to halve.
People familiar with the discussions told Bloomberg News that the tentative deal would lower tariffs on certain Canadian exports of steel and aluminium to 25 per cent from the current 50 per cent, and that duties on the non-American content of vehicles exported from Canada would fall to 15 per cent from 25 per cent. Neither figure has been confirmed by either government. Both were described as unfinished.
The reporting, published by Bloomberg and carried by Transport Topics, Seeking Alpha, Mining.com and Newsmax among others, came with three warnings that matter more than the headline numbers. The reduction is not expected to apply across the board. Different rates could apply to derivative products that contain steel or aluminium. And exclusions, scope and protective conditions for American fabricators were still being argued over on Wednesday afternoon.
For Canadian producers, the difference between a uniform 25 per cent and a 25 per cent headline rate riddled with derivative-product exceptions is the difference between a deal worth having and a rebranding of the status quo.
Where the metals tariffs came from
The duties at issue were imposed under Section 232 of the Trade Expansion Act of 1962, the national security statute the administration used in 2025 to erect tariff walls around American steel and aluminium production. Several close American trading partners subsequently negotiated deals capping their sectoral exposure in exchange for concessions elsewhere. Canada, the largest single supplier of both metals to the American market, did not.
Ottawa has focused its negotiating capital on the steel rate in particular, and on the automotive duties, rather than pursuing the reciprocal tariff file more broadly. That prioritisation reflects geographic and political arithmetic as much as economics. Multiple provincial sources told CTV News after Wednesday’s first ministers meeting that roughly half of the benefit of any tariff reduction would land in Ontario, with the balance spread across the rest of the country, and that the reduction was sufficient to bring Premier Doug Ford onside.
The same sources said the details of the sectoral reductions would “make or break the deal” politically for Prime Minister Mark Carney. That is a candid assessment of where the government’s exposure sits. The Section 338 tariff that Washington suspended on Tuesday covers about 5 per cent of Canadian goods exports. The Section 232 metals and automotive duties reach the industrial core of southern Ontario and Quebec.
Two-way Canada-United States trade in goods and services was roughly $900 billion last year, according to figures cited by Bloomberg. The relationship has come under sustained strain as the administration has escalated tariff pressure through its second term.
The aluminium problem
Aluminium is where the negotiation runs into an awkward fact. The United States cannot supply its own market. Canadian metal accounts for roughly half of American aluminium consumption, and Canada is the largest single source of American aluminium imports. Because domestic capacity cannot fill the gap, the tariff cost has been passed on almost entirely to American buyers rather than absorbed by Canadian smelters.
Jean Simard, president and chief executive of the Aluminium Association of Canada, made that argument directly in an interview with CTV News Channel on Wednesday. The Canadian sector faces “major” tariff pressure, he said, but the United States is “paying the brunt of those.”
“Right now, the U.S. is paying much more per ton of aluminum than Europe, because basically, they need the metal,” Simard said.
He described a supply squeeze that has tightened through the summer. Once the conflict between the United States and Iran began, he said, American aluminium inventory fell from about six weeks of cover to about one, which allowed Canadian producers to raise prices into a market that had no alternative. “That tension between supply and demand just kept the price going higher,” Simard said. His assessment of Canada’s negotiating position was that “time is on our side.”
The volume data are less comfortable. Statistics Canada figures cited by CTV News show that by the autumn of 2025, Canadian exports of unwrought aluminium and aluminium alloys were down 26 per cent from the levels reported the previous November. A sector can be extracting a better price per tonne while shipping materially less metal, and both things have been true at once.
The tariff-reduction talks have also drawn opposition from an unexpected direction. The Coalition for a Prosperous America, an American manufacturing advocacy group that has generally supported the administration’s tariffs, has lobbied alongside other stakeholders for any aluminium tariff cut to be paired with traceability requirements. Their argument, as reported by Bloomberg, is that the bulk of the American aluminium industry is not smelting but fabrication, and that rolling, drawing and extruding operations account for roughly 125,000 American jobs that a poorly designed reduction could expose.
That is why administration officials were described on Wednesday as under pressure to avoid applying a reduced rate uniformly. A single 25 per cent rate across primary metal and derivative products is administratively simple. It is also, in the view of American fabricators, the version most likely to let finished and semi-finished goods in at the same rate as raw metal.
Autos: 15 per cent, and why the number may not be enough
The automotive proposal is narrower than the headline suggests. Bloomberg reported that the tariff would fall to 15 per cent from 25 per cent on the non-American content of vehicles exported from Canada. Because Canadian assembly plants build vehicles with substantial American parts content, the effective rate on a finished vehicle depends heavily on how that content is measured and certified, an issue that had blocked agreement earlier in the week.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association and a member of the federal government’s external advisory group on the negotiation, told CTV News that any negotiated rate has to be judged against industry margins rather than against the prior tariff.
“It’s got to be below six per cent, and for 60 years we’ve been working at zero per cent,” Volpe said.
That comparison is the crux of the auto sector’s objection. A reduction from 25 per cent to 15 per cent is a meaningful improvement on an unsustainable number, but if the assessment is correct that a tariff above roughly 6 per cent exceeds the profit margin on the affected trade, then 15 per cent still means the duty is being paid out of capital rather than earnings.
Volpe warned that if automakers are made to absorb or pass through hundreds of millions of dollars in additional annual cost, assembly and parts operations in places such as Brampton and Woodstock, Ontario, become candidates for relocation to the United States or elsewhere. He was equally pointed about the logic from the American side.
“They are just shooting themselves in the foot if they’re going to charge their own companies a penalty to sell to their own customers,” Volpe said.
Unifor has taken a harder line still. Lana Payne, the union’s national president, who represents roughly 18,000 auto assembly workers, has said the negotiation must eliminate the 25 per cent automotive tariffs outright if the Canadian industry is to survive. A cut to 15 per cent does not meet that test.
Reaction across the political spectrum
Trump acknowledged on Wednesday that the United States was giving ground without specifying where. “Got to give something, and we’re doing certain things. We’re paying a high number. We’re reducing it a little bit,” he told reporters. “It’s good for everybody, but our farmers are going to be thrilled. Our manufacturers are going to be thrilled.”
The White House, the office of the United States Trade Representative and the Prime Minister’s Office did not immediately respond to requests for comment on the metals reporting, Bloomberg said.
Canada-United States Trade Minister Dominic LeBlanc, who met Trade Representative Jamieson Greer in Washington on Wednesday morning alongside chief negotiator Janice Charette, confirmed only that discussions were continuing. “We have more work to do,” he said after briefing the premiers.
Quebec Premier Christine Frechette, whose province hosts the bulk of Canadian primary aluminium capacity, said she could not evaluate an agreement she had not seen. “I have to get more information from Ottawa. I’ve asked many questions, and they have taken note, and we will talk again tomorrow, or maybe Friday,” she said. Her conditions for support are unchanged: supply management maintained, the cultural exception maintained, and protection for Quebec businesses and workers.
Saskatchewan Premier Scott Moe, whose province is less exposed to the metals and automotive files, framed the emerging arrangement as a win. He said the tariffs in question affect roughly 5 per cent of the Saskatchewan economy, that maintaining the status quo was not an option, and that the outcome would leave Canada with the most favourable trade terms of any American partner. “We need to have, in many ways, preferred market access to our largest trading partner,” Moe said. “I feel that is what we’re in the process of achieving.”
Conservative Leader Pierre Poilievre has argued that any agreement must also resolve the softwood lumber duties, which sit on a separate legal track. The United States Department of Commerce’s seventh administrative review set a preliminary combined anti-dumping and countervailing rate of 24.83 per cent, down from 35.16 per cent, with a final determination expected as early as late August. Global Affairs Canada confirmed in July that the preliminary result carries no immediate change to cash deposit rates until the final review is published, meaning Canadian mills continue to post duty at the higher figure in the interim.
Economic impact analysis
The commercial value of halving the metals tariffs depends almost entirely on architecture rather than on the headline rate.
Consider primary aluminium first. If the reduction applies to unwrought metal and alloys, Canadian smelters retain the pricing advantage that the current supply squeeze has handed them while their American customers see landed costs fall by roughly a quarter of the metal value. That is a straightforward transfer from the United States Treasury back into the supply chain, and it accrues disproportionately to American fabricators, which is precisely why the Coalition for a Prosperous America has sought conditions.
Now consider derivative products. If extrusions, rolled sheet and fabricated components remain at 50 per cent while raw metal drops to 25 per cent, the tariff structure hands a durable cost advantage to American fabrication over Canadian fabrication. Canadian value-added aluminium processing, which employs a materially higher-wage workforce than smelting, would face a worse relative position after the deal than a Canadian smelter does. Trade lawyers call that tariff escalation. It is a familiar development-economics problem, applied here between two advanced economies.
Steel presents a similar structure with a different balance. Canadian steel does not enjoy the same supply leverage as aluminium, because American mills can substitute more readily and because import competition from other origins is broader. A cut to 25 per cent restores viability to some Canadian mill capacity serving American customers, but it does not restore the pre-2025 trade pattern, and it leaves Canadian steelmakers paying a duty their American competitors do not.
On the automotive side, the arithmetic is unforgiving. Assume, as Volpe suggests, an industry margin in the low single digits on the affected trade. A 15 per cent duty on non-American content, even on a vehicle with high American parts content, produces a per-unit cost that exceeds that margin for many models. The result is not a modest compression of profitability. It is a decision point about where the next assembly mandate is placed, and mandate decisions are made years before production and are effectively irreversible once made.
That is the structural risk Ottawa is negotiating against. Tariffs can be removed by proclamation. Plant closures cannot be reversed by proclamation.
There is also a currency and inflation channel. The Canadian dollar traded near 1.3945 to the American dollar on Wednesday. American aluminium buyers have absorbed most of the metals tariff to date, and Federal Reserve staff appear to agree that the trade-policy contribution to American inflation is largely spent. The July minutes of the Federal Open Market Committee, released Wednesday, record that “several participants assessed that the pass-through of past increases in tariffs into the level of prices was now largely complete and that the effects of recently announced tariffs on measured inflation would likely be modest.” The central bank has moved on to other worries. That does not help a Canadian exporter, but it does suggest that the political pressure inside the United States to lower metals tariffs on inflation grounds has weakened.
The compliance mechanics nobody has published
Even a straightforward rate reduction creates work at the border, and in this case the reduction is unlikely to be straightforward.
Section 232 duties are administered through subheadings in Chapter 99 of the Harmonized Tariff Schedule of the United States, with separate provisions for primary metal and for the long and growing list of derivative articles that Commerce has added since 2025. A reduction that applies to some of those provisions and not others requires amendments at the subheading level, published in the Federal Register, with an effective date and a rule for goods already on the water. None of that exists yet.
The precedent from the past week is not encouraging on the point. The Section 338 tariff was suspended on Tuesday night by social media post, and as of Thursday no amendment or suspension had appeared in the Federal Register. Customs brokers continued to advise importers to plan for the duty. A metals reduction announced the same way, without published tariff text, would leave importers of record unable to file at the lower rate no matter what either government says publicly.
There is also the question of whether relief is prospective or retroactive. If the reduction takes effect on the date of the proclamation, entries filed at 50 per cent in the intervening weeks are not recoverable except through a specific refund mechanism. If it applies retroactively, refund claims will depend on entry documentation that many small importers have not maintained to that standard. Either way, the answer will be found in the text, and there is no text.
A third mechanic matters for aluminium in particular. If traceability conditions are attached, as American fabricators have requested, the reduced rate may be conditional on documentation of smelter of origin. Conditional tariff rates are administratively different from unconditional ones. They require the importer to hold and produce evidence at the time of entry, and failure to produce it converts the entry to the higher rate, potentially with penalties. Canadian smelters and traders that route metal through third-party warehouses or that blend feedstock will find this requirement more demanding than it sounds.
Finally, stacking rules will need clarification. Goods already covered by Section 232 measures were excluded from the Section 338 tariff. If Section 232 rates fall while the Section 338 measure survives in reserve, the interaction between the two becomes commercially significant for products near the boundary between the lists.
What Canadian businesses should do
Metals and automotive supply chains cannot wait for a signed text, and there are concrete steps that do not depend on knowing the final rate.
Map exposure by tariff line, not by sector. The distinction between primary metal and derivative product is where the value of this deal will be decided. Exporters should know exactly which of their products sit in the derivative categories that Bloomberg reported were still being negotiated on Wednesday, because those are the lines most likely to be excluded from relief.
Prepare for traceability. If American fabricators secure the origin-tracing conditions they are lobbying for, Canadian aluminium exporters will face documentation requirements on smelter of origin and metal provenance that many do not currently produce. Building that recordkeeping capability now is cheaper than building it under a compliance deadline.
Recalculate non-American content. Automotive exporters should verify their American content calculations under existing certification methods, because a 15 per cent rate applied to non-American content rewards precision. Content that can be documented as American origin is content that is not taxed.
Revisit duty drawback and refund positions. Any reduction is likely to be prospective, but the possibility of retroactive application, or of litigation over the Section 338 measure, makes clean entry documentation valuable.
Hold pricing conversations before the announcement, not after. Customers on both sides of the border will move quickly to claim the benefit of any reduction. Suppliers who have not decided in advance how a tariff cut is shared under existing contracts will find the question answered for them.
Do not assume durability. Washington declined last month to extend the Canada-United States-Mexico Agreement for a further sixteen years, placing it on annual review instead. A sectoral tariff rate agreed under those conditions is a rate for this year.
The unresolved question
By late Wednesday the full terms of the broader arrangement remained unclear, Bloomberg reported, and negotiators were still working through exclusions and derivative-product treatment. The Section 338 pause expires at the end of Saturday according to Ottawa, or Sunday according to the president’s own framing.
Canadian metals and automotive exporters therefore enter the weekend knowing that the headline numbers under discussion are 25 per cent and 15 per cent, that neither has been confirmed, that neither is expected to apply uniformly, and that the sections of the deal most relevant to Canadian value-added production are the ones still being argued about.
Trump has previously demanded changes to negotiated trade agreements, or abandoned them, at the last minute. Everyone at the table on Wednesday knew it.