Canadian Prime Minister Mark Carney and US President Donald Trump spoke by phone again on Tuesday afternoon as Canada sought a last-minute agreement to avoid new 50% tariffs taking effect at midnight, according to Reuters. It was the second call between the two leaders this week, but neither side provided clarity on the status of negotiations after weeks of intensive talks.

The new US tariffs would apply to roughly $20 billion worth of Canadian imports and would take effect regardless of whether the goods qualify for preferential treatment under the US-Mexico-Canada Agreement, the 2020 successor to the North American Free Trade Agreement, which has shielded much of Canadian industry from earlier tariff rounds. Carney's office confirmed only that the two leaders discussed the ongoing negotiations. The White House and the Office of the US Trade Representative did not respond to requests for comment.

Industry officials and trade experts warned that the new tariffs could lead to job losses and business closures in vulnerable sectors including lumber, wine and dairy, while also complicating broader USMCA negotiations ahead of the trade pact's first scheduled joint review by its three member countries in 2026. Candace Laing, chief executive of the Canadian Chamber of Commerce, said billions of dollars in goods previously unaffected are now at risk, adding that businesses have spent more than a year delaying hiring and investment as uncertainty persisted.

The auto sector has become the main pressure point in the talks. Two industry sources said the sides have discussed reducing US Section 232 tariffs on Canadian vehicles to 15% from 25%, with the possibility of further cuts tied to the level of US content in each vehicle. Section 232 is a 1962 US trade law that allows the president to impose tariffs on national-security grounds, the authority Washington used to levy the current 25% vehicle tariffs earlier this year. It remained unclear on Tuesday whether any agreement involving those changes could be completed before the deadline.

A Canadian auto industry official said even a 15% tariff would not be workable. Under duty-free North American trade before the 25% tariffs, average industry profit margins were only 6%, the official said, making a 15% tariff too costly to absorb. The official also said roughly half the value of every Canadian-built vehicle originates in the United States, meaning tariffs intended to pressure Canadian manufacturing would also harm US producers. Canada's auto assembly is concentrated in Ontario, where General Motors, Ford, Stellantis, Toyota and Honda operate plants, and components routinely cross the US border several times before a finished vehicle is completed.

A major unresolved issue is how content-based tariff deductions should be calculated. Washington wants only US-produced content to count toward deductions, while Canada argues that all North American content, including Canadian and Mexican-made parts, should qualify.

Separately, the US Commerce Department issued new rules on Tuesday requiring automakers exporting from Canada and Mexico to certify their US content levels annually rather than twice a year. Manufacturers must still recertify vehicles' American content by September 30 to claim deductions under the new cycle beginning December 1.

Canada's minister responsible for US trade, Dominic LeBlanc, and chief trade negotiator Janice Charette have been in Washington since last week. On Monday, they met for nearly two hours with US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick.

Greer has repeatedly cited Canada's retaliatory tariffs, some provinces' refusal to stock US liquor, and Canada's dairy supply management system, a regime of production quotas and high tariffs that limits dairy imports, as continuing US grievances. A Canadian government source said last week that all options remain on the table if the new tariffs take effect, including support for affected domestic industries and a possible suspension of bilateral trade talks, although the source said Ottawa still hoped Washington wanted a deal.