CANADA-U.S. AUTO TARIFF TALKS STALL OVER CONTENT RULES

Developing story: Tariff rates, content rules, auto-sector exemptions and broader Canada-U.S. trade terms may change before the Wednesday deadline.

U.S. and Canadian negotiators are trying to narrow a dispute over vehicle tariffs before a broader Wednesday deadline for new U.S. duties on Canadian goods, but a key disagreement remains over how to calculate the value content that can reduce the tariff burden. Reuters reported that the two sides were discussing a possible reduction of U.S. tariffs on Canadian vehicles to 15 percent after deductions.

The potential reduction would be significant because Trump’s current 25 percent Section 232 national security tariff on auto imports has threatened Canadian assembly lines and raised costs across an integrated North American industry. A lower rate would not end the dispute, but it could ease pressure on plants, suppliers and dealers that rely on predictable cross-border trade.

The disagreement is about what counts. Reuters reported that Washington wants only U.S.-specific content to be deducted from the tariff calculation, consistent with current U.S. practice. Canada is pushing for all North American content, including parts from Canada and Mexico, to be included in the deduction.

That difference has major commercial implications. Auto industry officials told Reuters that a broader regional-content deduction could push the effective U.S. tariff rate on North American-built vehicles into single digits. That would put Canadian and North American producers in a much stronger position against competitors from Japan, South Korea and the European Union, which currently face a 15 percent U.S. tariff rate without comparable regional content requirements.

The talks are occurring alongside the threat of 50 percent duties on about $20 billion of other Canadian goods. That gives the auto negotiation extra urgency because a partial vehicle deal could become part of a wider package, or could be lost if the broader dispute escalates.

The issues are politically difficult on both sides. The United States wants concessions on Canadian alcohol access, dairy quotas and retaliatory duties on U.S. autos and steel. Canada wants relief from tariffs that it says disrupt North American supply chains and violate the spirit of the U.S.-Mexico-Canada Agreement.

The negotiations are separate from broader trilateral USMCA renewal talks, Reuters reported. The United States is currently negotiating that track with Mexico, leaving Canada under additional pressure to resolve bilateral irritants before the larger trade framework is reopened more fully.

What is confirmed is that negotiators are discussing a possible auto-tariff reduction to 15 percent and that the content-deduction formula remains a central obstacle. What remains unresolved is whether a vehicle compromise can be reached before the broader tariff deadline and whether it becomes a bridge to a larger Canada-U.S. trade deal.

Fact-check date: August 18, 2026. Article type: News. Sources: Reuters. Developing note: Tariff rates, content rules, auto-sector exemptions and broader Canada-U.S. trade terms may change before the Wednesday deadline.