Washington and Ottawa work on a steel and auto deal as Honda warns of ‘catastrophic’ duties

The US and Canada are working on a deal to ease tariffs on steel and autos, according to sources^1,2. The Section 232 tariffs involved are administered by the Commerce Department, which puts Commerce Secretary Howard Lutnick, rather than the US trade representative, in charge of them². Lutnick and Dominic LeBlanc, Canada’s minister responsible for Canada-US trade, have maintained regular contact³.

Prime Minister Mark Carney said the Trump administration is “coming closer to our position” as talks gain momentum⁶. He said the talks have intensified slightly but that Canada is holding firm on its demands⁷, and that they have picked up as the administration showed more flexibility, though there is no deal yet^8,9.

Why it matters to investors

Carmakers are pressing for relief¹¹. Honda warned that 50% tariffs on Canada would be catastrophic for the auto industry^11,13. The USMCA is moving into an annual review process instead of a 16-year trilateral extension¹¹, and companies that qualify under the pact still owe the new 50% Section 338 duty¹². Honda’s concerns echo recent announcements from US Trade Representative Jamieson Greer^13,14.

Washington’s tone has softened¹⁰. The White House has tempered its tough talk on Canada trade as tariff-fueled inflation becomes a primary concern for voters before the midterms¹⁰. Trump’s top economic adviser suggested a deal to ease the trade war is possible¹⁵.

The signals remain mixed⁴. Canada reported limited progress in its talks with the US⁴, and the two sides are still some way from a deal⁵. Lutnick helped torpedo a previous round of negotiations over the summer⁵. Trump applauded Quebec’s new separatist premier on Tuesday and said at a Mississippi stop on Monday that Canada was “charging us massive tariffs” and had “treated us badly”¹⁵.

What to watch

The first marker is whether a steel and auto agreement emerges before the midterms, with Lutnick’s department holding the key tariffs^1,2.

The second is the USMCA review¹¹. The pact is shifting to an annual review¹¹, while qualifying companies still owe the Section 338 duty¹².

The third is the politics¹⁵. The US has accused Canada of trying to influence American elections through retaliatory tariffs, which Canadian officials have denied¹⁵. That dispute sits alongside talks that have gained momentum^3,6.