Kathmandu— Canadian Prime Minister Mark Carney held phone conversations with United States President Donald Trump Monday afternoon as Canada attempts to secure a deal and avoid the imposition of new 50 percent tariffs set to take effect Wednesday at midnight. The potential tariffs, covering approximately $20 billion in imports, threaten job losses and business closures across several Canadian sectors, despite much of Canadian industry being shielded from earlier US tariffs under the US-Mexico-Canada trade agreement. Negotiations are described as intense and delicate, with both sides grappling over key issues including automotive content rules and existing US auto tariffs.

Sticking Points in Trade Talks

The core disagreement centers on how to calculate North American content for vehicles, a critical factor in determining tariff reductions. Washington insists that only US-produced components should count towards deductions, while Canada advocates for including all parts originating from the US, Canada, and Mexico. With automotive profit margins averaging just 6 percent, even a proposed reduction to 15 percent from the current 25 percent is considered too high by Canadian auto industry officials, who point out that roughly half of the value of vehicles built in Canada already comes from US-sourced parts.

US Actions and Canadian Concerns

The US Commerce Department recently released new rules requiring automakers to annually certify their levels of US content to qualify for tariff deductions, streamlining a previously twice-yearly process. However, this change requires recertification by September 30th to apply to the December 1st cycle, adding further pressure on negotiations. Candace Laing, CEO of the Canadian Chamber of Commerce, warned that businesses have been delaying investment and hiring due to ongoing trade uncertainty, and that billions of dollars in goods are now at risk.

Longstanding Trade Disputes

The current dispute builds upon decades of trade friction between the two countries, historically focused on issues like Canadian softwood lumber imports and US access to Canada’s dairy market. However, President Trump has increasingly utilized tariffs as a central component of his economic agenda, aiming to revitalize domestic manufacturing in the United States. Recent meetings between Canadian officials and US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick have highlighted ongoing grievances from the US side, including Canada's retaliatory tariffs, provincial restrictions on US liquor sales, and its dairy supply management system.

Negotiations are continuing up to the Wednesday deadline, with both sides attempting to bridge significant gaps in their positions. The outcome will determine whether billions of dollars worth of trade remains subject to new tariffs and potentially impact the broader USMCA agreement.

(With inputs from Al Jazeera)

Originally published on abcnews.com.np.