U.S. Trade Representative Jamieson Greer entered a meeting with Canadian officials Friday afternoon with a frown.

For more than a week, Greer had been in wall-to-wall negotiations with Canada’s top trade officials, and the two sides were tantalizingly close to striking a deal that would break through more than a year of icy diplomatic and economic relations. The two North American neighbors had agreed on the overarching framework. Industry groups and stakeholders had been briefed. A deal seemed imminent.

Hours later, it fell apart.

Interviews with more than a dozen current and former Canadian and U.S. officials, lobbyists and business groups suggest the deal President Donald Trump had touted just three days earlier ultimately buckled under a combination of last-minute demands and political constraints on both sides. U.S. officials blamed Canada for introducing new asks late in the talks, including seeking lower tariffs on heavy trucks, while Canadian leaders — including Prime Minister Mark Carney — pointed the finger at turf wars within the Trump administration over who controlled key pieces of the deal.

The result: A dramatic escalation into a trade war between two countries with deeply integrated supply chains, one that could threaten more than $1 trillion in North American trade and, with it, could continue to raise economic pressure ahead of U.S. congressional elections in November. A 50 percent tariff on $20 billion worth of Canadian goods kicked in on Saturday, Canadians have promised to respond in kind and Mexico, which does business with both, could be caught in the crosshairs.

“In this reality, it’s sometimes easier to scrap a deal than give tariff reductions, just because it’s so politically fraught,” said a former USTR official, who like others in this story was granted anonymity to discuss the sensitive trade talks.

It was never going to be easy for Carney to sell a deal to a Canadian public furious with U.S. demands Ottawa believed were a threat to Canadian sovereignty, including provisions touching on culture and the country’s ability to strike future trade agreements.

The negotiations also exposed friction between Greer and U.S. Commerce Secretary Howard Lutnick’s respective public policy spheres. While the White House has been adamant officials are in lockstep, two people familiar with the talks said Lutnick felt the deal framework hammered out by Greer’s trade office was “sprung on” his agency, despite involving a number of policy issues he oversees.

Greer has led the talks with Canadian officials to avoid the new 50 percent tariff, which Trump rolled out last month with a 30-day grace period to allow for a negotiated resolution. The duties were originally set to go into effect at midnight on Aug. 19. But Trump paused them for three days, saying on social media late Tuesday night that the delay was “based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!”

But the negotiations ultimately centered on a contested set of issues — U.S. tariff reductions on cars, steel and aluminum — that fall under Lutnick’s jurisdiction at Commerce, giving the former Cantor Fitzgerald CEO a prominent voice in the negotiations.

Lutnick, who has been one of the Trump officials who have been most openly dismissive of Canada and its interests, spoke to Carney directly via text and phone multiple times in the last week, according to three people familiar with the negotiations. One of them said the two spoke as recently as Friday.

“I wouldn’t be surprised if that is the reason for the disconnect and why both sides blame the other for changing the terms at the last minute,” said one person familiar with the talks.

Carney, speaking at a press conference in Ottawa on Saturday, alluded to disunity on the American side of the table as contributing to his decision to pull out of the talks. The Canadian team was on the same page throughout negotiations, he said. “You cannot say that about the United States administration,” he added.

A White House official denied that there was any daylight between Greer and Lutnick in the talks.

“The idea that Lutnick and Greer were on fundamentally different pages — I know the Canadians have been saying this a lot — but this is a weird deflection,” the official said. “It’s not like Lutnick was going off the reservation and derailing this, or something, unilaterally. That’s just not the case.”

The Commerce Department did not respond to a separate request for comment, while the U.S. Trade Representative’s Office declined to comment.

Administration allies confirmed that while Greer was leading negotiations, some of the concessions Canada sought touched on areas overseen by Lutnick, making Commerce an important player in the final agreement.

Earlier in negotiations, the United States and Canada clashed over metals tariffs, with Lutnick objecting to broader concessions on the table.

But the prevailing argument on the U.S. side was that the decisive breakdown came not from divisions within the administration, but from a late Canadian ask, according to five people familiar with the talks. Two of the people familiar said that U.S. tariff rates on heavy-duty trucks were the sticking point between the two countries.

“The reality is simply that [the Canadians] kept bringing up last-minute changes related to the 232 tariffs, and that’s what largely derailed the negotiations,” the White House official said.

Carney flatly denied that Canada made any last-minute requests.

“‘No,’ is the short answer,” Carney told reporters at his press conference on Saturday. “We clarified what was on offer and were continually disappointed by the answers.”

Carney blamed the American side for pushing to exclude medium and heavy-duty trucks from tariff relief after the two sides had agreed to lower tariffs on autos to 15 percent, subject to U.S. content requirements. The Americans offered “no rationale” for the carveouts, he said, ticking off Canadian-made Ford and General Motors models that would still face tariffs.

“Canada was not going to capitulate on the major issues, at least not right now,” said one trade lawyer close to the administration. “Instead of addressing those, they put forward a bunch of minor things. A cornucopia of caprice.”

Canada, meanwhile, chafed at what it described as requests on the U.S. side that would have threatened “the French language and our culture,” as well as compromise its ability to strike third-party trade agreements. The White House official said the latter request was related to “economic cooperation and security,” not precluding Canada from making third-party deals. The official pointed to economic security language in a trade agreement the Trump administration inked with the United Kingdom last year as a corollary.

The tariffs on Canadian goods including wood products and alcohol, which went into effect at midnight, are expected to take a heavy economic toll on select industries and threaten to inflict wider damage as a trade war escalates. But Carney drew plaudits from across the domestic political spectrum for standing up to Trump.

Even Carney’s chief Conservative rival, Pierre Poilievre, offered a helping hand “to protect Canadians and our industries targeted by these unfair U.S. tariffs.”

Ontario Premier Doug Ford, a Conservative politician who nonetheless reliably supports Carney — a Liberal — on trade issues, immediately supported Ottawa’s decision to walk away from the table.

“I’m glad he didn’t sign that deal because it was a bad deal,” Ford told reporters Saturday. “I thought it was a terrible deal and I was very clear with the prime minister, once you make these deals they can last for years and years and go into decades.”

Carney promised details in the coming days on new trade retaliations targeting American steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. “This is a focused response to protect and defend our industries and allow them to compete with U.S. products in the Canadian market,” he said Saturday.

Those retaliatory tariffs will come into force on Sept. 8, Carney added.

Businesses on both sides of the border are now bracing for the collateral damage. Trade groups representing the North American auto, agriculture and lumber industries expressed surprise and dismay Friday night and into Saturday on the talks’ collapse.

The U.S. Chamber of Commerce, which represents millions of businesses, urged negotiators to return to the table at once. “The alternative is an escalating cycle of tariffs that will raise costs and impede economic growth,” said Neil Herrington, senior vice president of the business association advocacy group’s Americas program, in a statement.

Speaking on Fox News Saturday morning, Greer offered little clarity on the path forward: “It’s hard to say. We don’t have new talks planned with the Canadians. We’re moving forward with measures that respond to Canadian retaliation.”

Mike Blanchfield contributed to this report.

A trade agreement between the U.S. and Canada fell apart just before midnight on Friday, marking a significant setback in the ongoing trade war between the two traditionally close allies.

The deal’s collapse means 50 percent tariffs on $20 billion worth of Canadian goods now go into effect, hitting products ranging from alcohol to hockey skates.

“Canada declined to finalize the trade deal under the terms agreed earlier this week. Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walkbacks of other commitments by Canada upended the careful balance reached in the past days,” U.S. Trade Representative Jamieson Greer told reporters late Friday night.

“This is a missed opportunity for Canada to partner with the U.S.,” Greer added.

Canadian Prime Minister Mark Carney said in a statement that the results of the negotiations had “not been enough to meet our objectives for Canadians” and pointed the finger at Washington.

“Last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal,” Carney said. “As a result, this evening, I have decided to suspend trade negotiations with the U.S. and have directed Canada’s negotiators to return to Ottawa.”

He added that Canada will match the new U.S. tariffs “dollar for dollar.”

The failure came following a marathon series of talks led by Greer and Canada-U.S. Trade Minister Dominic LeBlanc over the past week. President Donald Trump also spoke with Carney multiple times in recent days.

There appeared to be a breakthrough earlier this week, when Trump announced he was pausing, for three days, the 50 percent tariff that was set to kick in on Aug. 19. “Canada and the U.S.A., subject to the finalization of documents, have a DEAL!” Trump wrote on social media late Tuesday night.

As part of the proposed agreement, the U.S. had offered to lower tariffs on automobiles, steel and aluminum if Canada was willing to drop its retaliatory measures and allow more access for U.S. businesses in its dairy and lumber markets.

Greer said Friday that as part of the deal, the administration was also prepared to open formal negotiations with Ottawa on updates to the U.S.-Mexico-Canada Agreement, the North American free trade deal that is currently up for a six-year review. The administration launched formal talks with Mexico on the pact earlier this summer but has thus far sidelined Carney’s government.

Greer did not specify which specific disagreements killed the deal Trump had touted just days earlier.

Its collapse sets up an even more fraught period for the massive North American trade relationship ahead of U.S. midterm elections, with voters consistently saying they are concerned about affordability.

Businesses on both sides of the border, already concerned by the Trump administration’s decision not to automatically extend the USMCA when it came up for review in July, now enter a period of protracted uncertainty and potentially punishing tit-for-tat tariffs, threatening the continent’s integrated supply chains and the industries that rely on them.

“This will be a body blow to North American competitiveness in this self-defeating trade saga. A whopping, non-absorbable tariff is not sustainable or viable for business,” said Candace Laing, president and CEO of the Canadian Chamber of Commerce and member of the Prime Minister’s Advisory Committee on Canada-U.S. Economic Relations in a statement. “Americans will see their costs go up, and Canadians will see customers, investment and small businesses disappear.”

The auto industry, in particular, could suffer.

“We are disappointed that the two nations were not able to reach an agreement. The negative impact is already being felt with U.S. auto exports to Canada down 23% over the past year,” Jennifer Safavian, president and CEO of Autos Drive America, said in a statement. The advocacy group represents international automakers that have operations in the United States, including Honda, Toyota and Volvo. “The U.S. auto industry’s continued success relies upon strong and stable partnerships across North America. We urge all parties to continue negotiations to finalize an interim deal and create a path toward a strengthened USMCA.”

Oliver Ward, Mickey Djuric and Nick Taylor-Vaisey contributed to this report.

President Donald Trump’s Tuesday backpedal from threats to impose 50 percent tariffs on Canada sparked a round of cries of TACO — that “Trump always chickens out.”

But even the administration’s adversaries concede Trump’s latest maximalist menace accomplished something important: unsticking more than a year-and-a-half of stalled trade talks between the two nations and pushing them into serious negotiations.

After months of fitful talks, Canadian and U.S. officials have in the weeks since Trump made his threat made significant headway toward resolving disputes over aluminum, dairy, alcohol and other key trade issues, potentially with some significant concessions from the administration.

That wouldn’t have happened without the president’s July threat to slap new and massive tariffs on items like beer, furs and hockey equipment, Canadian officials, former Democratic administration officials, business representatives and others told POLITICO.

“This was seen as, ‘Well, this is kind of outrageous, so we better pay more attention to it,’” said Canadian Sen. Peter Boehm, chair of the Senate Committee on Foreign Affairs and International Trade. “There was always a sense that there have to be talks, but invoking [the tariffs] did provide the leverage to do that, at 50 percent.”

And Véronique Proulx, the president and CEO of the Quebec Chambers of Commerce Federation, said that the threat “put pressure on the Canadian government to come to the table.”

“Very little had been happening over the past year,” Proulx said.

The prospect of punishing new levies, which could have hobbled the Canadian economy, is the latest example of a uniquely Trumpian negotiating ploy that relies on an ultimatum to gain leverage. The president touted the tactic for decades including in his book “Art of the Deal” and he’s used it repeatedly in his second term — and not just on trade.

To push NATO countries to increase their defense spending, he threatened to withdraw from the alliance and upend eight decades of global world order. When Trump wanted Panama to lower fees on U.S. ships passing through its canal, he threatened to retake the waterway. That threat was withdrawn only after the country approved a deal that allowed U.S. firms – instead of Chinese companies — to control ports on opposite ends of the canal.

And when Trump wanted Canada to drop a digital services tax targeting U.S. tech companies in 2025, he threatened to terminate all trade discussions with Canada, a move that scuttled the tax push.

“This is one case where his maximalist demand worked,” said one person close to the White House. “I don’t think this was [a TACO] actually. I think this is going to end up being an example of a successful negotiation.”

The tactic hasn’t always been successful, though. France still has a digital services tax despite Trump’s threat to impose a 100 percent tariff on wine. And threats to bomb Iran to the “Stone Ages” have not forced Tehran to capitulate to his demands.

Still, the latest threat on Canada appears to have produced some movement between the two countries. While it remains to be seen if Trump officially signs off on a deal, the two sides are negotiating. Canadian and American officials met once again on Wednesday to hash out a formal deal before Friday at midnight, the new deadline to reach an agreement.

Among the proposals are lower U.S. tariffs on metals, which risk backlash from protectionist circles in Washington, according to three people close to the process. On the Canada side, concessions on programs to protect their dairy and lumber industries and a commitment to back off streaming taxes — as an expected rollback remains in flux — are under consideration, while negotiators remain in talks over other long-standing irritants including tariff on automobiles.

And three days is a lifetime in trade negotiations.

White House spokesperson Kush Desai said that Trump has “consistently proven skeptics wrong” and “leveraged the power and might of the U.S. economy – the world’s biggest and best consumer market – to secure nearly 20 trade deals with historic market-access concessions from Japan, Taiwan, Vietnam, and the EU.”

Trump’s trade threats are existential for Canada, which sends roughly 72 percent of its exports to the United States.

While the U.S. tariff threat was targeted toward specific industries and only hit about 5 percent of U.S. imports from Canada, Wilbur Ross, Trump’s first-term Commerce secretary, said he believes it will force Canadian concessions.

“The 50 percent would have been a real burden because 50 percent is more than the exporter can absorb. It’s more than the importer can absorb, so it would have been a real penalty for them,” Ross said.

Canadian negotiators made repeated trips to Washington ahead of the U.S.-Mexico-Canada trade agreements July renewal deadline. But they have largely been kept on the sidelines so far regarding the USMCA update, as U.S. officials insisted that they would not negotiate unless Canada dropped its retaliation on U.S. liquor and automobiles.

When Ottawa offered what it saw as concessions — like peeling back a digital services law that would have raked in billions from U.S. tech giants — the Trump administration dismissed them as irrelevant to the negotiations. U.S. Trade Representative Jamieson Greer said Canada doesn’t “really get credit for doing something bad and then undoing it.”

“What [the Americans] are telling me — and they’ve been telling me for the last 18 months — is first of all, ‘Canada, get over it. You’re not special. I know you think you are. We are now including tariffs on everyone. There’s no exemptions for anybody,’” said one Canadian business official, also granted anonymity to discuss sensitive dynamics around the trade talks.

Productive talks between the U.S. and Canada could also pave the way to begin trilateral discussions with Mexico on the future of the trade agreement.

“They have struggled for a while to get the same attention as Mexico. A deal this week would in a way present the opportunity to move ahead bilaterally,” said Kate Kalutkiewicz, who served as a top trade adviser during Trump’s first administration.

Even as Trump has regularly reached for tariffs as a way to bully countries, the threat against Canada marked a new frontier. The president relied on Section 338 of the Tariff Act of 1930, a Great Depression-era law that had never been used to impose tariffs, to threaten about $20 billion worth of Canadian goods.

A Democrat working as a lobbyist for Canadian interests, granted anonymity to speak candidly about the political dynamics of the trade talks, added that there is “no question” the tariffs “got Canada to the table.”

“Canada was so reluctant to put a deal on the table because they felt that they would be put on the clock to make more concessions above and beyond what they already did.”

That’s why Trump’s threat was needed to push Ottawa to the table, said Kelly Ann Shaw, who served as deputy assistant for international economic affairs during Trump’s first term.

“The two sides appear to have accomplished more in three weeks than in a year of discussion,” she said.

The fact that the threat spurred Canada to the table may encourage the Trump administration to use it again, particularly because these tariffs never went into effect and therefore won’t face legal challenges.

“To me, the 338s, are in some ways, the new IEEPA tariffs,” said one trade lobbyist, granted anonymity to speak candidly about the negotiations, referring to a law Trump used to impose global tariffs, which were struck down by the Supreme Court in February.

Some U.S. businesses are already growing more comfortable with the reality that tariff threats are here to stay — particularly as they’ve watched other countries make concessions that would have been unlikely under previous administrations.

One business official, granted anonymity to speak candidly about private discussions with industry colleagues, said that the administration’s threats are bringing trading partners to the table and opening discussions on longstanding issues.

“Depending on the sector, you’re certainly seeing more understanding of how this is working and how this is being implemented, and you are seeing some of those historic logjam issues being broken,” the official said. “As industry gets more understanding of how this America First trade policy can create those opportunities, I think that there is more acceptance for being able to move forward in this way.”

Oliver Ward, Michael Blanchfield, Zi-Ann Lum and Mickey Djuric contributed to this report.

A deal between the U.S. and Canada to stave off new tariffs on Canadian goods is now on President Donald Trump’s desk, according to three people familiar with the discussions who were granted anonymity because of the sensitivity of the talks.

Now it’s up to Trump whether the 50 percent duty goes into effect, as scheduled, at midnight.

U.S. and Canadian officials have been in wall-to-wall talks for several days, with the administration pressing Canada to drop retaliatory measures it took against Trump’s tariffs last year — including provincial bans on U.S. liquor and tariffs on U.S. automobiles — and Ottawa looking to lower U.S. duties on autos, among other goods. The potential deal taking shape also includes Canadian concessions on its tariff-rate quota on dairy — an issue that has frequently come up in Trump’s missives against Canadian trade policy, according to two of the three people.

Negotiators hope a small deal on these issues can unlock broader talks between the two countries on a North American trade agreement that is up for review this year. But automobiles remained a major sticking point in negotiations Monday as U.S. and Canadian officials huddled in the afternoon, according to three other people familiar with the status of the talks, granted anonymity to discuss them. While the duties set to go into effect Wednesday only hit a small percentage of trade between the two countries, they could poison the broader negotiation on nearly $1 trillion worth of goods and services trade between the two countries.

“You can think of it as effectively trying to come up with an early harvest, an interim deal, a smaller package of what ultimately will land as part of the USMCA talks,” said Kelly Ann Shaw, who served as deputy assistant for international economic affairs during Trump’s first term.

The political stakes are high on both sides of the border. After repurposing a hockey fighting slogan to describe his approach to the U.S. during last year’s campaign, Canadian Prime Minister Mark Carney is now confronted with U.S. officials who are adamant that Canada will have to drop longstanding trade protections, like loosening its supply management program that protects the dairy and lumber industries.

“There’s going to be a political cost for Carney on any type of concession with some portion of the public,” said an industry figure, granted anonymity to speak candidly about the trade discussions. “I cannot understate how upset the average Canadian is with the United States, and really specifically with Trump.”

If the tariffs go into effect, the Trump administration risks creating more economic pain ahead of midterm elections — particularly in Maine and Michigan, two states that could help determine the control of the Senate.

“At the end of the day, [U.S. Trade Representative Jamieson] Greer cannot bring something to the president that doesn’t address some of the president’s personal core concerns,” Shaw said. “And I think Carney recognizes he’s got to bring something back where he can say, ‘Look, not only are we just at the table, but we actually got something for it.’”

The White House did not respond to a request for comment. Gabriel Brunet, the spokesman for Canada-U.S. Trade Minister Dominic LeBlanc, said the Canadians were “in a holding pattern at this time.”

Trump sparked the frenzied negotiations last month after he used a Great Depression-era tariff law to impose tariffs on a wide swath of Canadian goods, like hockey equipment and Canadian bacon, if Canada did not remove its tariffs on U.S. automobiles, eliminate provincial bans on U.S. alcohol and make changes to its dairy supply management laws. But his proclamation included a one-month lag before the duties to kick in, to allow more more talks. The tariffs officially take effect at midnight Aug. 19.

At the time, trade experts saw the tariffs as a way for Trump to force Canada to the negotiating table after struggling for months to make progress — to U.S. officials’ growing frustration.

“I think these three issues must be resolved before Canada can get into the room on USMCA with the United States,” said a former USTR official, shortly after Trump unveiled the new tariffs on Canada last month. “And the U.S. side is wanting a situation where Canada is in the room and so they’re trying to help prompt fixes to these three.”

Of the three issues, auto tariffs have emerged as a key sticking point. Canada is looking for reductions in the 25 percent auto tariffs Trump imposed last year on countries around the world and wants the duty to apply only to vehicle content produced outside North America, according to one of the people.

Automobiles could also be key to unlocking progress on U.S. demands. The United States has made clear that getting American wine and spirits back on Canadian shelves is a red line in the negotiations. But that issue is up to the individual provinces maintaining the bans, which will mean winning over premiers like Doug Ford of Ontario — a car-making hub.

Whether Ford caves will “come down to where we land on autos,” one of the people said, calling the automobile piece of the talks a “domino” in the discussions.

Ford exerted his control over his province’s liquor stores in March 2025, removing U.S. alcohol from shelves in the country’s most populous province. Other premieres soon followed, delivering a nearly $150 million blow to the U.S. distilled spirits industry, alone. While Alberta and Saskatchewan lifted their bans after just a few months, the two provinces account for less than 20 percent of the Canadian population.

Even if the premieres do end their boycott, there’s no guarantee that Canadians — who are also upset by Trump’s jabs that Canada should become the 51st U.S. state — will be quick to resume purchases.

“I would be surprised, even if the liquor goes back on the shelves, if Canadians buy it,” said the industry figure.

While Trump officials have repeatedly faulted Canada for being one of two countries that retaliated against the president’s tariffs — along with China — Trump is also attempting to get the country to drop longstanding protectionist measures for its dairy industry, a source of tension between the two neighbors for decades.

On the Canadian side, negotiators LeBlanc and Janice Charette have been pushing for reductions to U.S. national security tariffs imposed on automobiles and steel and aluminum. But the Trump administration has held firm on the 50 percent steel tariffs, according to three people familiar with the status of the metals discussions.

“That’s probably going to be something that is much more of a longer term” discussion, one of the people said, “if at all.”

Greer stressed to reporters last week that he has been satisfied with the steel tariffs and their impact on the domestic steel industry.

“This is working,” he argued, pointing to rising domestic steel production. Through mid-August, U.S. steelmaking was up more than 5 percent year-to-date on the same period last year, according to the American Iron and Steel Institute, and capacity utilization was up two percentage points.

“We’re seeing huge success in the American steel industry, which is exactly what President Trump wanted,” Greer said during a trip to Iowa Thursday.

Mike Blanchfield contributed to this report from Ottawa.