U.S. Trade Representative Jamieson Greer entered a meeting with Canadian officials Friday afternoon with a frown.
For more than a week, Greer had been in wall-to-wall negotiations with Canada’s top trade officials, and the two sides were tantalizingly close to striking a deal that would break through more than a year of icy diplomatic and economic relations. The two North American neighbors had agreed on the overarching framework. Industry groups and stakeholders had been briefed. A deal seemed imminent.
Hours later, it fell apart.
Interviews with more than a dozen current and former Canadian and U.S. officials, lobbyists and business groups suggest the deal President Donald Trump had touted just three days earlier ultimately buckled under a combination of last-minute demands and political constraints on both sides. U.S. officials blamed Canada for introducing new asks late in the talks, including seeking lower tariffs on heavy trucks, while Canadian leaders — including Prime Minister Mark Carney — pointed the finger at turf wars within the Trump administration over who controlled key pieces of the deal.
The result: A dramatic escalation into a trade war between two countries with deeply integrated supply chains, one that could threaten more than $1 trillion in North American trade and, with it, could continue to raise economic pressure ahead of U.S. congressional elections in November. A 50 percent tariff on $20 billion worth of Canadian goods kicked in on Saturday, Canadians have promised to respond in kind and Mexico, which does business with both, could be caught in the crosshairs.
“In this reality, it’s sometimes easier to scrap a deal than give tariff reductions, just because it’s so politically fraught,” said a former USTR official, who like others in this story was granted anonymity to discuss the sensitive trade talks.
It was never going to be easy for Carney to sell a deal to a Canadian public furious with U.S. demands Ottawa believed were a threat to Canadian sovereignty, including provisions touching on culture and the country’s ability to strike future trade agreements.
The negotiations also exposed friction between Greer and U.S. Commerce Secretary Howard Lutnick’s respective public policy spheres. While the White House has been adamant officials are in lockstep, two people familiar with the talks said Lutnick felt the deal framework hammered out by Greer’s trade office was “sprung on” his agency, despite involving a number of policy issues he oversees.
Greer has led the talks with Canadian officials to avoid the new 50 percent tariff, which Trump rolled out last month with a 30-day grace period to allow for a negotiated resolution. The duties were originally set to go into effect at midnight on Aug. 19. But Trump paused them for three days, saying on social media late Tuesday night that the delay was “based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!”
But the negotiations ultimately centered on a contested set of issues — U.S. tariff reductions on cars, steel and aluminum — that fall under Lutnick’s jurisdiction at Commerce, giving the former Cantor Fitzgerald CEO a prominent voice in the negotiations.
Lutnick, who has been one of the Trump officials who have been most openly dismissive of Canada and its interests, spoke to Carney directly via text and phone multiple times in the last week, according to three people familiar with the negotiations. One of them said the two spoke as recently as Friday.
“I wouldn’t be surprised if that is the reason for the disconnect and why both sides blame the other for changing the terms at the last minute,” said one person familiar with the talks.
Carney, speaking at a press conference in Ottawa on Saturday, alluded to disunity on the American side of the table as contributing to his decision to pull out of the talks. The Canadian team was on the same page throughout negotiations, he said. “You cannot say that about the United States administration,” he added.
A White House official denied that there was any daylight between Greer and Lutnick in the talks.
“The idea that Lutnick and Greer were on fundamentally different pages — I know the Canadians have been saying this a lot — but this is a weird deflection,” the official said. “It’s not like Lutnick was going off the reservation and derailing this, or something, unilaterally. That’s just not the case.”
The Commerce Department did not respond to a separate request for comment, while the U.S. Trade Representative’s Office declined to comment.
Administration allies confirmed that while Greer was leading negotiations, some of the concessions Canada sought touched on areas overseen by Lutnick, making Commerce an important player in the final agreement.
Earlier in negotiations, the United States and Canada clashed over metals tariffs, with Lutnick objecting to broader concessions on the table.
But the prevailing argument on the U.S. side was that the decisive breakdown came not from divisions within the administration, but from a late Canadian ask, according to five people familiar with the talks. Two of the people familiar said that U.S. tariff rates on heavy-duty trucks were the sticking point between the two countries.
“The reality is simply that [the Canadians] kept bringing up last-minute changes related to the 232 tariffs, and that’s what largely derailed the negotiations,” the White House official said.
Carney flatly denied that Canada made any last-minute requests.
“‘No,’ is the short answer,” Carney told reporters at his press conference on Saturday. “We clarified what was on offer and were continually disappointed by the answers.”
Carney blamed the American side for pushing to exclude medium and heavy-duty trucks from tariff relief after the two sides had agreed to lower tariffs on autos to 15 percent, subject to U.S. content requirements. The Americans offered “no rationale” for the carveouts, he said, ticking off Canadian-made Ford and General Motors models that would still face tariffs.
“Canada was not going to capitulate on the major issues, at least not right now,” said one trade lawyer close to the administration. “Instead of addressing those, they put forward a bunch of minor things. A cornucopia of caprice.”
Canada, meanwhile, chafed at what it described as requests on the U.S. side that would have threatened “the French language and our culture,” as well as compromise its ability to strike third-party trade agreements. The White House official said the latter request was related to “economic cooperation and security,” not precluding Canada from making third-party deals. The official pointed to economic security language in a trade agreement the Trump administration inked with the United Kingdom last year as a corollary.
The tariffs on Canadian goods including wood products and alcohol, which went into effect at midnight, are expected to take a heavy economic toll on select industries and threaten to inflict wider damage as a trade war escalates. But Carney drew plaudits from across the domestic political spectrum for standing up to Trump.
Even Carney’s chief Conservative rival, Pierre Poilievre, offered a helping hand “to protect Canadians and our industries targeted by these unfair U.S. tariffs.”
Ontario Premier Doug Ford, a Conservative politician who nonetheless reliably supports Carney — a Liberal — on trade issues, immediately supported Ottawa’s decision to walk away from the table.
“I’m glad he didn’t sign that deal because it was a bad deal,” Ford told reporters Saturday. “I thought it was a terrible deal and I was very clear with the prime minister, once you make these deals they can last for years and years and go into decades.”
Carney promised details in the coming days on new trade retaliations targeting American steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. “This is a focused response to protect and defend our industries and allow them to compete with U.S. products in the Canadian market,” he said Saturday.
Those retaliatory tariffs will come into force on Sept. 8, Carney added.
Businesses on both sides of the border are now bracing for the collateral damage. Trade groups representing the North American auto, agriculture and lumber industries expressed surprise and dismay Friday night and into Saturday on the talks’ collapse.
The U.S. Chamber of Commerce, which represents millions of businesses, urged negotiators to return to the table at once. “The alternative is an escalating cycle of tariffs that will raise costs and impede economic growth,” said Neil Herrington, senior vice president of the business association advocacy group’s Americas program, in a statement.
Speaking on Fox News Saturday morning, Greer offered little clarity on the path forward: “It’s hard to say. We don’t have new talks planned with the Canadians. We’re moving forward with measures that respond to Canadian retaliation.”
Mike Blanchfield contributed to this report.