Canada’s firm stance to call off trade negotiations with the US and the Donald Trump administration’s unpredictable policies hold key lessons for India, according to Ajay Srivastava, founder of Global Trade Research Initiative (GTRI).
Canada called off its trade negotiations with the US on August 21, 2026, and withdrew its negotiating team after realising that Washington was offering only limited tariff relief in exchange for concessions that could undermine Canadian manufacturing and constrain the country’s sovereignty.
The US described the breakdown of three days of intensive trade negotiations with Canada as a “missed opportunity” after Ottawa suspended the talks and instructed its negotiating team to return home, while Washington imposed 50%t tariffs on Canadian goods.
US Trade Representative Jamieson Greer said Canada had refused to conclude an agreement even though, according to him, the US had offered to provide Canada with the “best treatment of any major exporter” accessing the American market. Greer said Canada’s introduction of new demands and revisions to commitments made earlier in the talks had upset the balance that negotiators had reached.
Ottawa said it would introduce “dollar-for-dollar” retaliatory tariffs from September 8. The move brought an end to talks that had started on February 1, 2025, after the first round of new US tariffs was imposed.
Why US-Canada trade negotiations were important
The negotiations were notable because Canada and the US have enjoyed more than three decades of free trade. The arrangement began with the North American Free Trade Agreement, which took effect in 1994, and was later replaced by the US-Mexico-Canada Agreement in 2020. The USMCA continues to operate and allows most qualifying goods from North America to move between the countries without duties.
The need for a new agreement arose after the Donald Trump administration introduced additional tariffs outside the USMCA framework, on top of the standard World Trade Organization, or most-favoured-nation, duties.
Among the measures were Section 232 national-security tariffs of up to 50% on Canadian steel, aluminum, copper and related products, along with 25% duties on automobiles and parts. Washington also introduced separate tariffs covering lumber and wood products.
The US additionally applied a 10% Section 301 tariff to a wide range of Canadian goods, arguing that Canada had not done enough to enforce its prohibition on imports linked to forced labour.
It later used Section 338 to levy 50% duties on certain Canadian exports, including wine, cement, hockey equipment and other consumer products. Some of these tariffs were imposed even on goods that met USMCA rules of origin.
The “WTO-violative” tariffs reduced the commercial certainty that the USMCA was intended to provide. Canada therefore entered the bilateral talks seeking exemptions, meaningful tariff cuts and safeguards against additional unilateral measures before the USMCA’s 2026 joint review.
US offers little concessions
GTRI lists the limited and conditional relief that the US was willing to provide while continuing to introduce new demands.
The US proposed cutting the 50% tariffs on steel and aluminum to 25%, but tied the reduction to restrictive quotas.
The US offered to bring the tariff on vehicles manufactured in Canada down from 25% to 15%, but refused to provide the same treatment for medium- and heavy-duty trucks. This would have put Canadian-made Ford F-350, F-450 and F-550 trucks, along with General Motors’ Silverado, at a disadvantage.
The US proposed temporary protection against broader Section 338 tariffs and suggested postponing 50% duties on roughly $20 billion worth of Canadian consumer and agricultural exports. However, the relief was reportedly tied to tight import quotas, concessions involving Canada’s supply-management system for dairy and other agricultural products, and the removal of provincial curbs on sales of American alcohol.
The most contentious issue involved demands that went beyond traditional trade policy. The US wanted Canada to face limits on its ability to negotiate trade agreements independently, while also seeking preferential access to Canadian critical minerals.
Why Canada called off the trade negotiations
Canadian Prime Minister Mark Carney described the last-minute terms put forward by Washington as “uneconomic” and “unfair,” saying the US had demanded too much while offering too little in return.
Ottawa determined that the proposed arrangement would keep significant US tariffs in place while also restricting Canada’s freedom to manage its trade relationships, strategic resources, agricultural system and cultural policies.
Canada will now levy matching duties on selected US imports, including steel, dairy products, household appliances, agricultural machinery, pulp and paper, and electronics.
Carney accepted that the retaliatory measures would push up prices at home and limit consumer choice. However, he argued that agreeing to an imbalanced deal would inflict greater long-term harm on Canadian industry and sovereignty.
What this means for India
According to GTRI’s Ajay Srivastava, for India, which is negotiating its own trade agreement with the US, Canada’s experience offers a warning.
“New Delhi should seek clear, binding and durable tariff concessions before making commitments on agriculture, digital regulation, critical minerals or government procurement,” he says.
“An agreement that merely reduces some US tariffs while leaving Washington free to impose fresh duties under Sections 232, 301 or other domestic laws would offer little certainty,” he adds.
India should therefore safeguard its regulatory and strategic autonomy and avoid making unilateral concessions outside the negotiating process. Any concessions should be made only when the gains are balanced, enforceable and protected from future unilateral tariff measures, he concludes.
India and the US remain engaged in discussions for a trade deal. The Trump administration reduced the 50% tariffs imposed last year on India to 18% in February. However, the US Supreme Court later ruled that Trump’s reciprocal tariffs are illegal. The Trump administration has since then been looking for ways to impose tariffs on countries around the world.
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