Quota System for Steel at Centre of Canada-U.S. Trade Talks as Deadline Looms
Canada and the United States are working to finalize a trade deal that would impose a tariff-rate quota on Canadian steel exports, cutting the current Section 232 duty from 50 per cent to 25 per cent on shipments within the quota while maintaining the full 50 per cent above it. Trade Minister Dominic LeBlanc and chief negotiator Janice Charette met with U.S. Trade Representative Jamieson Greer in Washington on August 21, 2026, hours before a deadline to lock down the details Globe and Mail.
Under the proposal, four million tonnes of Canadian steel per year would enter the U.S. at the reduced 25-per-cent rate, according to a steel industry executive and two industry sources who confirmed the figure to the Globe and Mail. Shipments exceeding that volume would face the existing 50-per-cent tariff, the rate the Trump administration imposed under Section 232 of the Trade Expansion Act Globe and Mail. Reuters, citing its own source, reported on August 19 that the prospective deal would halve the top-line tariff rates on Canadian steel and aluminum to 25 per cent Reuters. The Globe's August 21 reporting adds the quota mechanism that structures that reduction.
The quota volume of four million tonnes reflects a negotiated ceiling rather than a free-trade threshold. Steel exported above it remains at the punitive rate, meaning Canadian producers would face a tariff cliff once the ceiling is breached. The structure resembles a tariff-rate quota (TRQ) in the technical sense: a lower in-quota tariff paired with a higher over-quota tariff, a mechanism Canada itself uses in its import regime for dairy and other supply-managed products.
On the Canadian side, the proposed deal would require Ottawa to remove all of its counter-tariffs on U.S. steel and further restrict imports of steel from third countries, according to the steel executive. That latter element aligns with measures Carney announced on November 26, 2025, when the federal government said it would tighten tariff-rate quota levels for steel products from non-free-trade-agreement partners from 50 per cent to 20 per cent of 2024 levels Prime Minister's Office. The government also announced at that time that the horizontal remission of counter-tariffs on aluminum products would continue beyond January 31, 2026 Prime Minister's Office. The prospective deal's requirement that Canada drop its steel counter-tariffs would be the logical conclusion of that trajectory.
Aluminum is also under negotiation. Canada is seeking to reduce U.S. tariffs on aluminum exports, which currently sit at 50 per cent alongside steel under the Section 232 regime. Reuters reported that the U.S. could waive 50-per-cent tariffs and reduce some Section 232 duties on both Canadian steel and aluminum as part of the deal Reuters. The specifics of an aluminum quota or reduced rate have not been detailed in the reporting available.
On autos, the U.S. has offered to cut its tariff on Canadian-built vehicles from 25 per cent to 15 per cent. Reuters confirmed this figure in its August 21 reporting as well Reuters. The offer comes with a condition: Washington is seeking a guarantee of 50-per-cent American content in Canadian-made vehicles Globe and Mail. The current U.S. tariff on Canadian autos sits at 25 per cent, part of the Trump administration's broader tariff regime that also includes 50-per-cent duties on Canadian steel and aluminum and 25-per-cent duties on other Canadian goods Globe and Mail.
The 50-per-cent American content demand would embed a domestic-content threshold directly into the bilateral tariff schedule, a departure from the regional value-content approach under CUSMA. Whether that can be reconciled with existing North American rules of origin is a technical question the negotiating teams are working through alongside the tariff-rate specifics.
Separately, Global Affairs Canada has indicated that preliminary results of its softwood lumber review may serve as final anti-dumping and countervailing duty rates, expected to be issued in August 2026. The Canada-U.S. news page on the Global Affairs website lists trade negotiations dated August 14, 2026, covering U.S. tariffs on Canadian steel and aluminum and tariff-rate quota policies under bilateral agreements Global Affairs Canada. The lumber file operates on its own track, distinct from the steel, aluminum and auto negotiations, but it adds to the density of bilateral trade matters converging on the same weeks.
The deal taking shape would represent a partial easing, not a removal, of the Trump administration's Section 232 tariffs. Canadian steel exporters would gain meaningful relief on the first four million tonnes shipped south, but the over-quota rate remains at 50 per cent, and the concessions Canada would offer in return, dropping counter-tariffs and tightening third-country steel imports, are not trivial. For aluminum producers, the framework is still being negotiated. For auto assemblers, a 10-percentage-point tariff cut comes tied to a U.S. content guarantee that could complicate supply-chain decisions across the integrated sector.
