• US officials temper expectations for a swift Canada trade deal, signaling tough negotiations ahead.
  • Trump and Carney are expected to speak again Tuesday, with tariffs looming as leverage.
  • Ottawa prepares countermeasures while seeking a favorable CUSMA modernization.

Fragile Prospects

Efforts to secure a revamped trade agreement between the US and Canada have hit a snag, as Washington downplays hopes for a breakthrough, according to people familiar with the matter. The tone suggests that President Donald Trump is using tariff threats as a bargaining chip, with Canadian Prime Minister Mark Carney expected to hold another call with the president on Tuesday.

“We’re not seeing the kind of movement that would suggest a deal is imminent,” said a senior US official, speaking on condition of anonymity. “The president remains focused on getting a fair deal for American workers.” The comments come amid escalating tensions over the future of CUSMA, the successor to NAFTA, which both sides have pledged to modernize.

Ottawa’s Balancing Act

Carney’s team has signaled a willingness to intensify negotiations, but also to prepare retaliatory tariffs if the US follows through on threats. “We continue to engage constructively, but we will not accept an unfair deal,” a Canadian official said. The prime minister’s office did not respond to a request for comment.

Foreign Minister Mélanie Joly told reporters that Canada is “ready to work around the clock” to reach an agreement, but stressed that Ottawa has “options on the table” should talks stall. The comments reflect a delicate balancing act for Carney, who faces pressure from industry groups to avoid a disruptive trade war.

Tariffs as Leverage

Trump has repeatedly framed the negotiations as a win for US leverage, suggesting that tariffs could be imposed if a deal isn’t reached by a threatened deadline. The White House did not immediately respond to requests for comment. Analysts note that the president’s approach is consistent with his broader trade policy, which has often used uncertainty to extract concessions.

Market reaction has been muted so far, with the Canadian dollar holding steady against the greenback, but investors are wary of a prolonged impasse. “The risk is that both sides dig in, and we see escalating measures,” said a trade economist. “The clock is ticking.”

Outlook

Despite the pessimistic tone from US officials, both sides have kept lines of communication open. Tuesday’s call between Trump and Carney is seen as a critical moment, with observers looking for signs of flexibility. “If there’s a breakthrough, it will likely come from a direct conversation between the leaders,” noted one insider. Without a deal, the possibility of tariffs remains a real threat, potentially disrupting billions in cross-border trade.

As the talks continue, the focus is on the details — particularly around dairy, autos, and dispute resolution mechanisms. Sources say that Canada has offered concessions on dairy access, but the US is pushing for more. “We’re not there yet,” said the US official. “But we’re committed to keeping the dialogue going.”