The United States and Canada are intensifying discussions over a potential agreement to ease tariffs on Canadian steel and automobiles, according to sources familiar with the negotiations. The talks come as trade tensions between the two longtime economic partners remain unresolved and as the November 3 U.S. midterm elections increase political pressure surrounding tariffs.

Washington and Ottawa Revisit Tariff Relief

The negotiations are focused on Section 232 tariffs, which currently include duties of up to 50% on Canadian steel and 25% on automobiles. Sources cited by Reuters said the two governments are discussing possible relief from those measures as they seek to repair relations following the collapse of broader trade negotiations in August.

Section 232 tariffs are administered by the U.S. Commerce Department, placing Commerce Secretary Howard Lutnick at the center of the discussions. Canada’s Minister responsible for Canada-U.S. trade, Dominic LeBlanc, has also been in regular contact with Lutnick, according to sources familiar with the talks.

Auto and Steel Industries Face Cross-Border Pressure

The dispute has significant implications for North American manufacturing because the U.S. and Canadian economies are deeply integrated through cross-border supply chains. Automakers and parts suppliers rely on the movement of components and finished vehicles between the two countries, meaning tariffs can raise production and transportation costs throughout the industry.

Previous negotiations broke down in August over several issues, including whether tariff relief should extend to medium- and heavy-duty vehicles, which are important to Canadian manufacturing. U.S. automakers had sought relief from the original 25% auto tariffs, which increased the cost of moving vehicles and parts across the border.

Election Pressure Raises the Stakes

The timing of the renewed negotiations is particularly significant. Tariffs on Canadian imports have become a political liability for some Republican candidates in border states, while the Republican Party faces the possibility of losing control of Congress in the November midterms. One Canadian source told Reuters that an agreement could be reached before the election, although U.S. sources indicated that Washington continues to seek further concessions from Canada.

The political dimension does not guarantee a settlement. A Canadian industry source described a potential agreement as likely to be narrow rather than comprehensive, if one is reached at all. Canadian Prime Minister Mark Carney said there had been a slight intensification in discussions, while emphasizing that Ottawa’s position had not changed.

January Tariff Threat Keeps Businesses Focused

The urgency is also linked to the next scheduled escalation. Trump has previously announced plans to increase tariffs on Canadian steel and auto imports to 50% from January 1, 2027. A broader agreement could therefore provide manufacturers with greater certainty over future costs and supply-chain planning, while failure to reach an accord could prolong uncertainty across North American industry.

Markets will be watching whether the latest discussions produce a formal framework before the midterms and whether Ottawa accepts the additional concessions sought by Washington. Trump’s recent removal of 50% tariffs on certain Canadian agricultural and forestry products suggests some flexibility may be possible, but the scope of any steel and auto agreement remains uncertain. For manufacturers and investors, the key issue will be whether negotiations produce durable tariff relief or only a temporary and narrowly defined arrangement.