By Promit Mukherjee and David Shepardson
OTTAWA, Aug 19 (Reuters) - Canadian trade negotiators were flying back to Ottawa on Wednesday to work on finalizing a trade agreement with the U.S. after President Donald Trump said he had a deal with Canada that would stave off the threat of new U.S. tariffs.
Trump had threatened to impose 50% tariffs on some Canadian goods starting early Wednesday but extended the deadline by three days late on Tuesday, citing progress. Canadian negotiators have been meeting
their U.S. counterparts in Washington daily.
"We feel confident that we've reached an agreement that will not only continue to protect American workers, American jobs, American supply chains but really strengthen the North American economy," U.S. Trade Representative Jamieson Greer told reporters after meeting his Canadian counterparts.
Prime Minister Mark Carney said on X that Canada already had the best terms with the U.S. due to its continental trade deal.
"We are now moving towards an agreement that reinforces that Canadian advantage, including by securing the best terms in each of Canada’s most important strategic sectors and providing greater certainty about our future trading relationship," Carney added.
Until the countries finalize the deal, negotiators face a deadline of 12:01 a.m. ET (0401 GMT) on Saturday, when tariffs on $20 billion worth of Canadian goods are scheduled to take effect.
U.S. AUTO TARIFF STICKING POINT
A key sticking point for Ottawa is the existing 25% U.S. tariff on imported Canadian vehicles and parts, which industry executives say threatens to kill domestic auto manufacturing.
Two auto executives said Canada is pushing to reduce the tariff to 10%, instead of the U.S. offer of 15%.
Trump, pressed on what Washington would do about the U.S. auto tariff, replied: "They were paying a high number. We're reducing it a little bit."
Trump hailed what he called a great deal subject to the finalization of documents that would mean U.S. manufacturers and farmers would not pay any tariffs to export their goods to Canada.
It is unclear if auto tariffs will be resolved this week or delayed until a broader scheduled review of the U.S.-Mexico-Canada trade deal, which looks set to drag on into next year.
"We are working collaboratively towards a finalized agreement between our two countries," said Dominic LeBlanc, the Canadian government minister in charge of trade with the United States.
LeBlanc was heading back to Ottawa on Wednesday to meet Carney and hold other meetings required to finalize the trade deal, his office said.
The open question remains whether the U.S. will allow the value of regional content — from Mexico, the U.S. or Canada — to be deducted from the auto tariff or only allow deduction of the value of U.S. components from imported vehicles.
Another open question is whether the reductions will apply to medium- and heavy-duty vehicles or only passenger cars and trucks. Canada wants the reductions to apply to all vehicles, the sources said.
A White House proclamation said senior U.S. officials had been told Canada had committed to remove what Washington considers discriminatory or unequal treatment of U.S. alcoholic beverages, cheese and motor vehicles.
The Canadian government has not confirmed those commitments or disclosed what concessions it has offered in exchange. A Leger poll found on Wednesday that 56% of Canadians want Carney to make no further concessions to the U.S.
KEYSTONE XL
Trump, in a Truth Social post on Tuesday, said the long-abandoned proposed Keystone XL oil pipeline from Alberta to the U.S. "may be awoken from the grave," without explaining whether it was an important part of the deal Canada and the U.S. were discussing.
In October, Carney had said reviving the pipeline could play a part in strengthening U.S.-Canada energy cooperation.
Former President Joe Biden canceled the pipeline, designed to carry Canadian crude to U.S. refineries, in 2021 after years of environmental and Indigenous opposition.
South Bow, the TC Energy spinoff that owns Keystone XL assets and is developing a new cross-border pipeline proposal using some of that infrastructure, declined to comment.
Trump imposed the latest tariffs under Section 338 of the Tariff Act of 1930 in response to Canadian policies covering U.S. alcohol, dairy products and automobiles.
(Reporting by Promit Mukherjee and David Shepardson; additional reporting by David Ljunggren, Amanda Stephenson; Editing by Caroline Stauffer and Rod Nickel)
