By Promit Mukherjee and David Shepardson
OTTAWA,/WASHINGTON, Oct 26 (Reuters) - The United States and Canada are working on a deal to ease US tariffs on Canadian steel and autos, two US and four Canadian sources said, as the two governments try to repair relations that soured after trade talks broke down in August.
The talks focus on tariffs imposed under Section 232 of US trade law, including up to 50% tariff on Canadian steel and a 25% tariff on autos, with negotiators discussing potential relief
from those duties.
The negotiations come as US President Donald Trump faces record-low approval ratings and his Republican Party risks losing control of Congress in next week's midterm elections. Tariffs on Canadian imports have become a political liability for Trump, with Republican candidates in border states calling for an end to the trade war with Canada.
One Canadian source briefed on the negotiations said a deal on steel and auto tariffs was possible before the November 3 elections, while US sources said the Trump administration wanted Canada to make further concessions. The sources spoke on condition of anonymity because the talks are private.
The Section 232 tariffs are administered by the Commerce Department, putting Commerce Secretary Howard Lutnick rather than the US Trade Representative's office at the center of the negotiations, sources on both sides of the border said.
Lutnick and Canada’s Dominic LeBlanc, the minister responsible for Canada-U.S. trade, have been in regular contact recently, one of the sources said.
LeBlanc’s office said Canada remains in contact with Washington.
“Canada remains in constructive dialogue with our U.S. counterparts on a range of priorities,” a spokesperson for LeBlanc, said in a statement. “We stand ready to work constructively and in good faith towards a more mutually beneficial trading relationship that respects Canada’s interests.”
The White House, the Commerce Department and the USTR’s office did not immediately respond to requests for comment.
A Canadian industry source said a deal could come quickly, but not necessarily a broad one. “If it happens, it’ll happen fast. But my sense is it’ll be a narrowed deal, if it even happens,” the source said.
Another Canadian source said they have believed for some time that a deal on Section 232 tariffs is likely before the midterms. Any agreement would be driven by Trump and Canadian Prime Minister Mark Carney, the source said, adding that both leaders had said a mutually beneficial deal is possible.
Carney has said he wants a good deal for Canada.
US and Canadian trade talks collapsed in August over issues such as whether to cut duties on medium- and heavy-duty vehicles that are critical for Canadian factories. US automakers had hoped the trade talks would deliver relief from Washington's original 25% tariffs that have raised the cost of shipping vehicles and parts across the border.
Trump has previously announced that he would raise the tariffs on steel and auto imports from Canada to 50% from January 1, 2027. At a political rally on Sunday, Trump predicted the trade dispute would be resolved "soon," without providing specifics.
Trump signed an order on Friday to remove 50% tariffs on some Canadian agricultural and forestry products in a move that could benefit businesses in Maine.
(Reporting by Promit Mukherjee and David Shepardson; Additional reporting by David Ljunggren and David Lawder;Editing by Caroline Stauffer and Sanjeev Miglani)
