President Trump says the United States and Canada are close to reaching a trade deal, adding that the two sides have “the concept of a very good deal,” while Prime Minister Mark Carney described their discussions as a good conversation on the future of trade between the two countries. Negotiations are to continue over the next several weeks. According to President Trump, under the new deal, “all tariffs” that U.S. farmers face when exporting to Canada will be removed. Canada has a supply management system that applies quotas and tariffs to imports of products including dairy, poultry, and eggs, long a concern for U.S. administrations. President Trump also said the Keystone XL pipeline, whose Presidential permit former President Biden withdrew, is part of the trade negotiations.
The proposed Keystone XL pipeline would have carried Alberta oil to U.S. refineries but was canceled after the Biden administration revoked its permit in 2021, with Biden saying at the time the pipeline “disserves the U.S. national interest.” The proposed pipeline would have carried 830,000 barrels per day of oil from the oil sands of northern Alberta to the major U.S. storage hub at Cushing, Oklahoma, and then to Gulf Coast refineries. Canada, the world’s fourth-largest oil exporter, sells more than 90% of its oil production to the United States. In recent years, Canada has supplied over 60% of U.S. oil imports. U.S. refineries still process 5 million barrels per day more oil than is supplied domestically because they have been retooled to use heavy oils. Canadian crude oil has traded at a discount to West Texas Intermediate due to its quality and limited export pipeline capacity. Over the past 10 years, Canadian oil has averaged a 13% discount to West Texas Intermediate and a 16% discount to OPEC-sourced crude oil.
Calgary-based South Bow, which took over TC Energy’s oil pipeline business in 2024 after it lost billions on the Keystone pipeline, is pursuing the Prairie Connector project, a proposed pipeline that would use existing Keystone XL infrastructure in Canada and connect to a new U.S. pipeline carrying Alberta oil to Wyoming. The Trump administration granted the 550,000-barrel-per-day pipeline a permit in April 2026. A final investment decision is expected by mid-2027.
Trade talks between the United States and Canada this summer ended on August 21, after which the United States imposed 50% tariffs on $20 billion worth of Canadian imports. Canada retaliated with its own counter-tariffs on roughly the same value of U.S. imports, ranging from 15 to 50%. The United States then added more tariffs on Canadian products and banned certain Canadian products, including most alcoholic drinks, from being exported to the United States.
New 50% tariffs on all Canadian cars, trucks, and auto parts are set to start on January 1, 2027, with levies currently at 25%. Canada wanted to lower those tariffs as part of the trade deal with the United States discussed this summer. That trade deal would have cut the top-line tariff rate on Canadian cars and light-duty trucks from 25% to 15% and the tariffs on aluminum and steel from 50% to 25%.
According to U.S. Trade Representative Jamieson Greer, Canada walked out on the tentative trade deal because it brought new demands to the table. According to Carney, the deal collapsed because the United States would not apply tariff relief to Canadian-made medium- and heavy-duty trucks, because it wanted to restrict Canada’s ability to establish trade deals with other countries, and because it demanded changes that would weaken Canadian protections for French-language content. Greer said the United States has no objections to Canada’s efforts to protect the French language, and that its main concern with Canada’s deals with other countries involves issues such as steel dumping by third countries, citing China as a “non-market economy country” of concern.
Conclusion
President Trump has announced the “concept” of a new trade deal with Canada and Prime Minister Mark Carney has agreed that the two leaders had a good conversation on the future of trade between their countries. According to President Trump, the trade deal would include removing “all tariffs” that U.S. farmers face when exporting to Canada, and it would restart the Keystone XL pipeline, whose Presidential permit former President Biden revoked. Canada provides the United States with 85% of its potash, 90% of its oil production, and it’s the type of oil many U.S. refineries need. Because of its quality and limited pipeline export capacity, Canadian oil trades at a steep discount to West Texas Intermediate. Prior talks on a trade deal collapsed this summer with both countries upping tariffs.
