Canadian Prime Minister Mark Carney spoke with U.S. President Donald Trump on Tuesday as Ottawa sought to head off a new round of American tariffs on Canadian goods just hours before a midnight deadline.
Trump signed orders for the steep 50% duties last month, with the White House alleging "discriminatory treatment" by Canada against U.S. alcohol, automobile and dairy products.
The tariffs are set to take effect Wednesday, covering products such as wine, hockey sticks and cement.
Efforts to avoid the tariffs are going down to the wire.
Carney spoke by phone with Trump on Monday afternoon about the trade negotiations, a spokesperson for the Canadian leader told AFP.
On Monday, Carney said that talks to avert the duties were at an "intense and delicate" stage.
Overall, Trump's incoming tariffs target around 5.5% of Canada's exports to the United States, worth about $20 billion, Oxford Economics estimates.
While this only poses a "modest" negative risk to Canada's economy, Oxford Economics said in a recent report that the duties would "affect central Canada's manufacturing sector much more severely."
Canadian negotiators have been in Washington to push for a deal to avoid the new tariffs and also secure relief on Trump's sector-specific duties – which have battered Canada's auto, steel, lumber and aluminum industries.
Ottawa has reportedly offered concessions such as pressuring provinces to put U.S. alcohol and wine back on their shelves, Canadian media said. But it remains unclear if a deal is imminent.
The U.S. Trade Representative's office did not respond to queries on the matter.
"It's not unusual for a trade negotiation to go right up to the deadline," former U.S. commerce official Christopher Padilla told AFP.
He expects that the Trump administration threatened new tariffs to try and win early concessions from Canada as the countries negotiate over renewing the U.S.-Mexico-Canada free trade agreement (USMCA).
But even if officials reached a pact that was acceptable to both sides on the trade front, this might be rejected by Trump, who could seek to penalize Canada over other political concerns, he said.
This could include issues like Canada's efforts to deepen economic ties with European countries or China.
"The relationship with Canada has been challenging from the beginning," Padilla said.
He warned that Trump also has "a history of lashing out against allies when he is frustrated on other fronts," such as when he is not getting what he wants from parties like Iran, China or Russia.
Oxford Economics anticipates that manufacturers who stand to be most impacted include those in the cement, paper, printing, wood, clothing and electronics equipment sectors.
With the U.S. Supreme Court striking down many of Trump's global tariffs earlier this year, the president had tapped an untested legal provision for the new duties targeting Canada.
These duties will not apply to energy, potash or goods already facing sector-specific tariffs, but they are set to hit products covered by the USMCA.
Trump's trade envoy Jamieson Greer said the tariffs aimed to "hold Canada accountable" for its retaliation against the United States.
Provinces have taken U.S. alcohol products off their shelves, he said, and "given better market access to dairy products from the European Union" among other actions, Greer said in July.