U.S. Ambassador Pete Hoekstra’s blunt admission that tariffs on Canadian imports will likely remain in place shatters hopes for a complete reset in U.S.-Canada trade relations under the Trump administration’s second term.
Key Takeaways
- U.S. Ambassador Hoekstra has indicated that while negotiations with Canada are progressing, some U.S. tariffs on Canadian goods will likely remain in place despite improving relations.
- Trade talks are being structured in two phases, with immediate issues like tariffs addressed first before broader agreements, purposely avoiding formal USMCA review until 2026.
- President Trump is pursuing a “holistic” negotiation approach that includes border security, fentanyl concerns, digital taxes, and supply management within a bilateral framework rather than a trilateral one.
- The U.S. has imposed three different sets of tariffs on Canada: border security/fentanyl-related tariffs, steel and aluminum tariffs, and automotive sector duties.
- Prime Minister Mark Carney has been actively engaging with the Trump administration to improve relations, with negotiations focused on mutual security interests and critical supply chains.
Lingering Tariffs Despite Improving Relations
Despite improving diplomatic relations between the United States and Canada, U.S. Ambassador to Canada Peter Hoekstra has candidly acknowledged that American tariffs on Canadian imports may not be completely eliminated through ongoing negotiations. In a recent statement that tempered expectations for Canadian businesses, Hoekstra admitted, “I’m not sure they’ll be totally removed,” indicating that while progress is being made in bilateral discussions, the Trump administration intends to maintain leverage through selective trade barriers. The ambassador’s comments reveal the complex nature of current negotiations, which must address three distinct sets of U.S. tariffs currently impacting Canadian businesses: border security measures tied to fentanyl concerns, universal steel and aluminum duties, and specific automotive sector charges.
The 25% border tariff imposed by President Trump in March cited concerns about fentanyl trafficking into the United States through Canada, despite U.S. Customs and Border Protection data showing that less than 1% of seized fentanyl comes across the northern border. This disconnects between stated justification and statistical reality has frustrated Canadian officials, who view the tariffs as primarily economic leverage rather than security measures. Nevertheless, Hoekstra maintains an optimistic tone about the overall relationship, stating, “I think the president wants a very positive relationship,” while simultaneously preparing Canadian counterparts for the likelihood that complete tariff elimination remains off the table.
Two-Phase Negotiation Strategy
The United States and Canada have agreed to a strategic two-phase approach to trade negotiations, deliberately sidestepping the formal review of the Canada-U.S.-Mexico Agreement (CUSMA), which isn’t scheduled until 2026. This tactical decision reflects President Trump’s preference for bilateral agreements over multilateral frameworks, similar to the approach taken in recent U.S.-U.K. trade talks. The first phase aims to address immediate tensions, particularly regarding tariffs, while stabilizing the broader trade relationship by leveraging the countries’ close security partnership. Canadian Ambassador to the U.S. Kirsten Hillman confirmed this focused approach, specifically noting that broader USMCA discussions aren’t currently on the table.
“Whether there’s a possibility of that [CUSMA review] being advanced is not really under discussion right now. Right now we’re focusing on the meeting, and the agreement, between the prime minister and the president, which is to have some bilateral discussions to come up with an arrangement that works for both countries.” – said Kirsten Hillman
This strategic delay acknowledges the complexity of renegotiating the trilateral agreement and allows both countries to address immediate concerns first. The U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick are actively engaged with their Canadian counterparts in these discussions, focusing on eliminating certain tariffs while establishing new frameworks for digital services taxation and critical supply chains. The measured approach represents a diplomatic victory for Prime Minister Carney’s government, which has successfully avoided being pulled into comprehensive USMCA renegotiations before establishing a stronger bilateral foundation with the Trump administration.
Trump’s “Holistic” Negotiation Approach
Ambassador Hoekstra has characterized President Trump’s negotiation style as fundamentally “holistic,” encompassing numerous interconnected issues beyond simple tariff reductions. This comprehensive approach considers various trade barriers, market access restrictions, government subsidies, and security concerns as part of a single negotiating framework. Particularly contentious areas include Canada’s supply management system for dairy and poultry products and its proposed Digital Services Tax, both of which have drawn sharp criticism from U.S. trade representatives. Simultaneously, the U.S. has emphasized demands related to fentanyl interdiction, defense spending commitments, and security cooperation, especially regarding China’s influence in North America.
“Hoekstra described Trump’s approach to negotiations as a ‘holistic’ one that considers tariffs, the opening of different markets, and non-tariff trade barriers such as government subsidies.” – said U.S. Ambassador Pete Hoekstra
The negotiations may produce novel arrangements like preferred-customer agreements for critical minerals and coordinated policies to exclude certain Chinese components from North American supply chains. This approach aligns with President Trump’s broader economic security agenda, which views trade policy as inseparable from national security objectives. Despite initial tensions, including Trump’s previous comments about Canada potentially becoming the “51st state,” recent meetings between Trump and Prime Minister Carney have been characterized as respectful and constructive, focusing on shared interests rather than contentious rhetoric. However, Hoekstra’s candid assessment that some tariffs will remain signals that despite improved diplomatic language, the U.S. intends to maintain economic pressure points in its relationship with Canada.
Canada’s Strategic Response
Prime Minister Mark Carney has adopted a pragmatic approach to the challenging trade environment, prioritizing relationship building with the Trump administration while firmly rejecting the notion of Canada becoming integrated into the United States. Recent high-level meetings have focused on establishing a foundation of mutual respect while Carney’s government develops its negotiating strategy. Canada’s relatively recent election has delayed its trade talks compared to countries like the United Kingdom, which have already made significant progress in bilateral negotiations with the Trump administration. Canadian officials are particularly focused on securing protections that would prevent future unilateral tariff impositions based on national security grounds under Section 232 of U.S. trade law.
“Hoekstra said he is hopeful Canada and the United States can come to an agreement ‘relatively quickly,’ while adding there are some ‘tough issues to negotiate and to talk about.” – Stated U.S. Ambassador Pete Hoekstra
International Trade Minister Dominic LeBlanc has emphasized that current discussions are separate from USMCA provisions, creating a diplomatic space for Canada to address immediate concerns while preserving options for the formal treaty review scheduled for 2026. The Carney government appears to have accepted that some level of tariffs will remain as the price of doing business with the Trump administration, focusing instead on mitigating their impact and securing concessions in other areas of mutual interest. Despite these challenges, both ambassadors Hoekstra and Hillman have expressed optimism about reaching agreements relatively quickly on the most pressing issues, suggesting that while the trade relationship may not return to pre-tariff conditions, a new workable equilibrium is within reach.
