The United States will hold off for three days before imposing new tariffs on Canadian goods, buying negotiators time as Washington and Ottawa work to finalize a trade agreement.

President Donald Trump announced the delay, saying: "I have paused the 50% Tariffs against Canada that were scheduled to kick in tomorrow morning for a three-day period." He added that the two countries have already struck a deal and are now working through the remaining paperwork.

Canadian Prime Minister Mark Carney said the talks have moved forward considerably, though important work remains. Tuesday's conversation was the second call between Trump and Carney this week, anchoring weeks of negotiations that have run since July. Trump had originally set the deadline for the new Canadian levies at 19th August.

Keystone XL revival raised

The two nations have been divided mainly over U.S. auto tariffs and Canada's provincial bans on American alcohol. In a post on the White House website, Trump said Canada pledged to address U.S. complaints over dairy, alcohol, and car duties.

He also suggested that a definitive trade agreement could facilitate the revival of the Keystone XL pipeline, a project intended to connect Alberta to the United States that was rejected during the Obama and Biden administrations. Its original developer, TC Energy, formally abandoned the project in June 2021 after President Joe Biden revoked its cross-border permit on his first day in office, meaning any revival would require the pipeline to find a new sponsor. The pipeline has long faced opposition from environmentalists and Indigenous communities, but Trump has repeatedly called for bringing the project back. It would carry about 830,000 barrels of oil per day.

The office of U.S. Trade Representative Jamieson Greer also issued a statement, saying the U.S.-Canada deal should expand market access for U.S. goods while aligning the two countries on digital trade and economic security. The agreement will contain "many important provisions that will continue to protect our market and American workers, along with our Canadian partners," the office said.

Carney, for his part, has insisted that Canada will prioritize building an economy that is stronger, more self-reliant, and better able to compete globally. Canadian negotiators and cross-border businesses welcomed the three-day extension after repeatedly warning that the new tariffs would harm both economies.

15% levies under discussion

Trump's latest proposed tariffs targeted Canadian wine, dairy, cement, apparel, and hockey gear, adding to existing U.S. levies on Canadian steel, aluminum, autos, and lumber. Canada's focus remains on securing a trade pact that rolls back or slashes U.S. tariffs across these core areas.

The United States, in turn, wants Canada to lift its retaliatory auto tariffs and open its dairy quotas to allow more American cheese imports. That demand strikes at the heart of Canada's supply-managed dairy system, which sets production quotas and imposes steep tariffs on above-quota imports, and which has been a recurring point of friction in North American trade talks, including during the negotiations that produced the USMCA. Washington is also asking Canada to end the ban on American alcohol that most provinces rolled out last year in response to Trump's tariffs.

Ahead of the Wednesday deadline, U.S. and Canadian negotiators were working on a deal that could bring tariffs on Canadian autos down from 25% to 15%, according to sources. Insiders said the two sides remain split over which vehicles would receive the lower rates, with the U.S. holding out for cars that use mostly American components. Most of Canada's vehicle assembly is concentrated in Ontario, and components routinely cross the border several times before a finished car rolls off the line.

Canada must also secure the cooperation of provincial premiers to resume the sale of American alcohol, as liquor regulation falls strictly under provincial rather than federal jurisdiction. Ontario Premier Doug Ford, whose jurisdiction is most heavily impacted by U.S. automotive tariffs, has so far indicated a willingness to rescind the restrictions only upon achieving an equitable agreement.

Narrow window ahead

The three-day pause gives negotiators a narrow window to resolve the remaining disagreements before the higher tariffs potentially take effect. A failure to reach an agreement could revive concerns among manufacturers and businesses that rely heavily on cross-border supply chains.

The United States and Canada have deeply integrated economies, with billions of dollars in goods moving between the two countries each month under the US-Mexico-Canada Agreement, the trilateral pact that replaced NAFTA in 2020 and is itself due for a scheduled joint review in 2026. Higher tariffs could therefore increase costs for businesses and consumers while disrupting industries that depend on parts and raw materials from across the border.

For Canada, the negotiations also come as Ottawa seeks to reduce its dependence on the U.S. market by expanding trade relationships elsewhere. Carney has increasingly emphasized economic resilience and diversification — a priority underscored by the fact that roughly three-quarters of Canadian exports flow to the United States — indicating that Canada wants any agreement with Washington to strengthen its position rather than leave the country vulnerable to future tariff threats.

The next three days could prove critical in determining whether the two sides can turn their latest progress into a broader and lasting trade agreement.