Trade talks between the US and Canada collapsed Friday in part amid a last-minute standoff over cutting US tariffs on Canadian medium- and heavy-duty vehicles, people familiar with the matter said.
Both countries had the outline of a deal, which would have lowered US sectoral tariffs on autos, steel, aluminum and lumber, and were locked in talks Friday. But the two sides remained at odds over the treatment of larger vehicles, the people said, speaking on condition of anonymity to describe private negotiations.
The Canadians insisted on the additional relief in a phone call late Friday, and the Americans balked, the people said.
Under the deal the two countries were working toward, the regular auto tariff would have been lowered to 15% from the current 25%. Canada wanted that relief expanded to medium- and heavy-duty vehicles, which typically range from large pickup trucks to commercial vehicles, they said.
Canadian Prime Minister Mark Carney said Saturday that to deny such relief to trucks “is a big change, obviously.”
Carney said without the tariff relief on trucks, Ford’s new plant in Ontario, which makes F-350s and larger pickup trucks “would have been excluded. No rationale,” he added.
The US considered this request to be an additional demand that wasn’t part of the deal, the people said.
But one Canadian industry official said it was the Americans who tried to divide the industry.
“At the last minute, the Americans pulled that classification out of the class of product that would get a reduced tariff,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, told the Canadian Broadcasting Corp. Saturday, referring to super-duty pickup trucks such as the Ford F-350s.
Volpe suggested the impetus may have been to “get rid of auto manufacturing in Canada.”
Both sides blamed the other for the sudden collapse of talks, which resulted in the US imposing new 50% tariffs on about $20 billion in Canadian goods. Carney on Saturday announced dollar-for-dollar counter-tariffs on American goods starting Sept. 8.
Read More: Canada Unveils $20 Billion Counter-Tariffs to Mirror Trump Levy
Lana Payne, national president of Canada’s largest private-sector union, Unifor, told reporters Saturday that Canada had no choice but to draw a line in the sand.
She said autoworkers were concerned that agreeing to a tariff carveout on US parts only would lead to more aggressive demands when negotiating the wider North American trade pact.
“And eventually you’re getting away from being able to have a competitive sector in Canada. And that was really problematic,” she added.
Unifor had told the Carney government that it wanted auto parts compliant with the existing North American trade deal to be exempt from tariffs.
Carney’s office declined to comment, while the White House and the office of the US Trade Representative didn’t immediately respond to a request for comment.
This story was originally featured on Fortune.com
