Canada and the United States appear to be nearing a trade agreement, with Canadian Trade Minister Dominic LeBlanc saying the two countries are “very close” after marathon negotiations in Washington. The talks, which lasted more than three hours with US Trade Representative Jamieson Greer, are intended to ease a tariff standoff that has disrupted North American commerce for months.

The proposed deal would reportedly halve US tariffs on Canadian steel and aluminum while also reducing duties on automobiles. That would mark a significant retreat from the 50% tariff on Canadian goods that Washington had been threatening, a measure that would have affected an estimated $20-30 billion worth of exports. For manufacturers and suppliers on both sides of the border, the stakes are less about headlines than about whether cross-border production can keep moving with fewer interruptions.

A three-day ceasefire

President Donald Trump added to the optimism by announcing a three-day pause on tariffs that had originally been scheduled to take effect on August 19-20. He cited the possibility of reaching a deal and, in a somewhat separate remark, referenced the revival of the Keystone XL pipeline as part of the broader bilateral agenda.

Prime Minister Mark Carney has also acknowledged what both sides describe as substantial progress.

Even so, “very close” and “done” are different words for a reason. LeBlanc said more work still needs to be done, underscoring that the final details still matter for sectors exposed to steel, aluminum and auto duties.

Whiskey diplomacy and provincial politics

In one of the more unusual developments, Canadian provinces have been using alcohol as a bargaining chip. All provinces except Alberta and Saskatchewan agreed to return US liquor products to store shelves, a goodwill gesture intended to show that Canada is willing to lower tensions.

The liquor ban had been introduced as a retaliatory step during the tariff escalation. Provincial leaders who agreed to restock the products framed the move as pragmatism, while those who declined urged residents to buy domestically produced alternatives instead. The episode highlights how the dispute has spread beyond federal trade officials into provincial policy and consumer-facing decisions.

Markets are already pricing in a deal

The Canadian dollar has strengthened in response to the negotiations, rising to its highest level in nearly three months. The currency’s gains reflect a combination of trade optimism and higher oil prices, both of which directly support the Canadian economy.

Steel and aluminum producers would likely see the most immediate relief from any agreement. Canadian companies in those sectors have been operating under the threat of 50% duties. A deal that secures lower rates would give them more confidence to make capital expenditure decisions for the first time in months.

The automotive sector is also central to the talks. Cars and car parts cross the US-Canada border multiple times during the manufacturing process, so lower automotive duties would affect not only Canadian manufacturers but also American automakers that rely on cross-border production networks.

If the deal collapses, a full 50% tariff on $20-30 billion worth of Canadian goods would amount to one of the largest trade barriers between the two countries in modern history. Trump’s three-day tariff pause has created a narrow window: if negotiations stall, the duties are set to return.