Carney Gives Updates on US Trade Negotiations After Europe Secures Deal

Prime Minister Mark Carney speaks in Albany, P.E.I., July 28, 2025. Ron Ward/The Canadian Press

News Analysis

Prime Minister Mark Carney has disclosed some details about the current state of negotiations with the United States as the Aug. 1 deadline draws near. The news comes after Japan and the European Union both finalized trade deals with U.S. President Donald Trump’s administration.

Carney hinted during a July 28 press conference that the management of dairy tariffs under the United States-Mexico-Canada (USMCA) free-trade agreement is currently a topic of discussion.

He also drew comparisons between Canada and the European Union (EU), which announced a trade deal with the United States on July 27. Ottawa in recent days has tempered expectations on whether a deal could be reached by the deadline and whether tariffs will remain on Canada.

But Carney dismissed comments made by Trump last week about the possibility of Canada and the United States not reaching a deal at all.

“It’s a negotiation. Take what’s said in the public domain as part of that context,” Carney told reporters during an unrelated announcement in Prince Edward Island.

Trump said on July 25 that he has not had “a lot of luck” in securing a trade deal with Canada, which he said could mean Canada will be stuck paying U.S. tariffs. “It’s not really a negotiation,” he said.

Trump told Carney in a public letter earlier in July that the 25 percent tariff placed on Canada related to his border security concerns will increase to 35 percent on Aug. 1. Trump said he would consider changing his stance if Canada stops the flow of fentanyl into his country over the shared border.

This tariff comes with an exemption for goods covered by the USMCA free-trade deal, meaning approximately 75 percent of goods are exempted, according to the White House. Carney said last week that aside from the sectoral tariffs on items such as steel and aluminum, which are universal, the U.S. tariff faced by Canada is “very low.”

Few details have been aired about the stumbling blocks in the negotiations. It’s not clear what other actions Canada could take on border security after having injected more resources, listed Mexican cartels as terrorist entities, and introduced far-reaching security legislation.

Trump’s letter, aside from concerns over fentanyl, also took aim at Canada’s dairy tariffs. Supply management protects the sector and it’s been a longstanding bipartisan trade irritant for the United States.

Dairy Tariffs

Carney briefly touched on the issue during his July 28 press conference when asked by reporters whether he'd be open to providing more access to the Canadian dairy market.

“We’ve been clear about supply management. We’ve been clear about language rights as things that are fundamental to our structure,” Carney said.

The prime minister noted that the USMCA, negotiated during Trump’s first term, expanded the Americans’ access to the Canadian dairy market.

“The question is the effectiveness of those arrangements,” Carney said, apparently confirming that supply management has been part of the ongoing discussions.

Washington has launched formal protests under the trade agreement since the USMCA came into force, saying Ottawa was not abiding by its obligations to grant a certain level of access to U.S. dairy products.

Canada’s other trading partners have made similar protests in the context of a separate free-trade deal, including New Zealand. Ottawa and Wellington reached a settlement earlier in July that could result in more New Zealand dairy products entering the Canadian market.

‘Landing Zone’

Carney said negotiations with the United States have been “tough” but said his government is “standing up for Canada” while Trump is “looking out for the interests of American workers.”

“There is a landing zone that’s possible, but we have to get there, and we'll see what happens,” he said.

The prime minister said it’s “unlikely” a deal with zero tariffs will be reached, given the U.S. approach to trade has changed. “It is no longer an approach that hinges on integration. It’s a tariff-based approach for several sectors, in their opinion, key sectors, sectors linked to national security for the U.S.”

Whereas it could have been seen as a political win for Carney to secure a deal with Trump early, the evolving context is now suggesting the opposite could be true.

Had Canada been the first to agree to a deal where different U.S. tariffs remained in place, Carney would have faced harsh criticism as he had run an “elbows up” election campaign focused on standing up to Trump.

With the two large economies of G7 member Japan and the European Union having now signed deals with 15 percent tariffs kept in place, if a Canada-U.S. agreement is reached also containing U.S. tariffs, it will be easier for Carney to say that there was little room to manoeuvre in efforts to obtain a tariff-free deal.

The universal 50 percent U.S. tariffs on steel and aluminum are still applying to Japan and the EU, suggesting Canada could face a similar fate.

The universal U.S. tariffs on automobiles and parts, which had been implemented with a 25 percent rate in recent months, have been dropped to 15 percent for both the EU and Japan.

Major Investments

It remains to be seen whether Canada will have to replicate some aspects of the U.S. deals with Japan and the EU, which include total investments of more than US$1 trillion in the United States.

Carney mentioned that Canada shares similarities with the EU in terms of its commercial relationship with the United States, saying the two are the largest investors in the country.

“Our companies, our pension funds, others, invest heavily in the United States,” he said. “We are also partners in in defence and security with the United States, as you saw with with the agreements at NATO just last month.”

The EU and Japan have promised to invest massive sums in the United States. The EU trading bloc is the second-largest economy in the world behind the United States, whereas Japan ranks fourth behind China and Germany.

As part of its deal, Japan must invest US$550 billion in the United States in sectors including energy, semiconductors, critical minerals, pharmaceutical, and shipbuilding. Meanwhile, the European Union is to invest US$600 billion by 2028 in the United States beyond its current investments, including by purchasing defence equipment.

While the Carney government is attempting to make a pivot to Europe to purchase defence equipment to move away from its dependence on the United States, Europe will have to spend more on U.S. military hardware.

As for differences between Canada and the EU, Carney noted that part of the U.S-EU deal includes the EU purchasing US$750 billion in energy imports from the United States by 2028 to wean off Russian energy.

“To help them do that, America needs Canadian energy,” Carney said, noting that the U.S. trade deficit with Canada is due to its Canadian energy imports. Canada is the fourth-largest producer of crude oil and fifth-largest producer of natural gas globally, and 95 percent of its oil and gas exports head south of the border, according the the country’s 2024–25 Energy Fact Book. Approximately one-quarter of oil refined in the United States came from Canada in 2023.

Canada had a trade surplus in goods of US$63.3 billion with the United States in 2024, and a trade deficit in services of US$31.7 billion in 2023, according to the latest U.S. government data.

Meanwhile Japan had a trade in goods surplus of US$69.4 billion with the United States in 2024, whereas the EU had a US$235.6 billion surplus that year.