Canada has won a three-day reprieve from President Donald Trump’s threatened 50% tariffs, but a final trade deal remains hung up on Canadian auto exports, leaving Washington and Ottawa until Friday to settle one of their biggest remaining disputes, Reuters reported on Wednesday.
Trump added energy into the mix late on Tuesday, saying the 830,000-bpd Keystone XL oil pipeline “may be awoken from the grave” as part of an agreement.
Trump declared that the two countries “have a DEAL,” subject to finalization of documents, but Canadian Prime Minister Mark Carney stopped short of confirming that. Carney said only that “substantial progress” had been made and that “important work” remained.
Washington has postponed the tariffs until the end of August 21 while negotiations continue, and Ottawa has not confirmed the contents of any agreement.
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The biggest remaining fight is over cars. Washington has offered to cut its 25% tariff on Canadian-made vehicles to 15%, potentially falling as low as 7.5% for vehicles with enough U.S. content. Ottawa says that is still too high and wants Canadian and Mexican parts counted alongside U.S. components when the tariff is calculated. The difference between the two could determine whether Canada’s languishing auto industry can remain competitive in its largest export market.
The auto fight has also become leverage over the rest of the deal. Trump wants Canada to unwind retaliatory measures imposed during the trade war, including tariffs on U.S. vehicles and provincial bans on American liquor, while opening further access to Canada’s protected dairy market.
Keystone XL is Trump’s deal-sweetener. After giving Canada three more days to negotiate its way out of the threatened 50% tariffs, Trump dangled the revival of a pipeline that would give Alberta another 830,000 barrels per day of capacity into the U.S.
Keystone XL would not be the first new Canadian crude route Trump has backed this year. In April, Trump issued a presidential permit for Bridger Pipeline’s roughly $2 billion expansion from the Canadian border in Montana to Wyoming, a 550,000-bpd project that partly revives the old Keystone XL corridor and could begin construction in 2027. Bridger is already moving forward.
Trump offered no details on what reviving Keystone XL would entail, and neither Washington nor Ottawa has said the pipeline is part of the unfinished trade agreement.
By Charles Kennedy for Oilprice.com
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