Canadian Prime Minister Mark Carney’s diplomatic efforts to persuade the Trump administration to remove punitive tariffs on Canadian goods have failed, according to sources close to bilateral trade negotiations. The rejection comes despite weeks of intense behind-the-scenes diplomacy and represents a significant setback for U.S.-Canadian relations.
“President Trump was very clear with me—either we renegotiate NAFTA 2.0 or the tariffs stay,” Carney told reporters outside Parliament in Ottawa yesterday. The former Bank of England governor, who assumed Canada’s leadership last year after Justin Trudeau’s resignation, has staked significant political capital on resolving the trade dispute that has cost Canadian manufacturers an estimated $3.8 billion since January.
The 25% tariff on Canadian steel and 15% on aluminum were reimposed during Trump’s first month back in office, citing “national security concerns”—the same justification used during his first term. The move blindsided Canadian officials who believed the USMCA agreement had settled trade tensions between the neighbors.
At the heart of the dispute lies Trump’s persistent claim that Canada’s dairy management system unfairly disadvantages American farmers. “Canada has been taking advantage of the United States for decades,” Trump wrote on Truth Social last week. “Their dairy cartel is killing our farmers. Until that changes, they’ll pay the price.”
Trade data from the U.S. International Trade Commission tells a different story. The U.S. actually maintains a $4.2 billion agricultural trade surplus with Canada, with dairy products representing less than 0.2% of total bilateral trade, which reached $718 billion last year.
I spoke with James Henderson, a steelworker from Hamilton, Ontario, whose plant has reduced shifts since February. “We’re just pawns in some political game,” he told me. “My overtime is gone, and my neighbor got laid off last month. How is that making America great?”
The economic pain extends beyond manufacturing. In British Columbia, lumber producers have seen orders from U.S. homebuilders drop by 17% since Trump’s executive order expanded tariffs to include Canadian softwood lumber in March.
Carney’s three-day Washington visit included meetings with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, but a requested Oval Office meeting never materialized. According to a senior Canadian official speaking on condition of anonymity, “Trump refused to meet unless we came with substantial concessions on dairy quotas already in hand.”
Foreign policy analysts suggest the standoff reflects Trump’s transactional approach to even America’s closest allies. “This is classic Trump—create a crisis, demand concessions to solve it, then claim victory,” explains Meredith Reid Sarkees, international relations professor at Georgetown University. “The question is whether Carney has the political flexibility to give Trump a win without appearing to capitulate.”
Canadian business leaders are growing increasingly frustrated. The Business Council of Canada released data showing that uncertainty over tariffs has frozen approximately $2.1 billion in planned cross-border investments since February.
“We’re seeing companies delay expansion plans or divert capital to other markets,” says Goldy Hyder, president of the Business Council. “This isn’t just about steel or aluminum anymore—it’s creating a chilling effect across our integrated supply chains.”
The impasse has significant domestic political implications for Carney, who faces his first federal election next year. His Conservative opponents have already launched attack ads questioning his negotiating strategy and accusing him of “diplomatic naiveté” in dealing with Trump.
For everyday Canadians, the economic consequences are becoming increasingly tangible. Consumer prices for automobiles, appliances, and construction materials have risen between 3-7% since February, according to Statistics Canada.
The U.S. Trade Representative’s office defended the tariffs in a statement to
