Canada and the U.S. negotiate a quota system for steel tariffs

Canada and the United States are closing in on a trade deal that would cut the U.S. tariff on Canadian steel from 50 per cent to 25 per cent — but only for a set volume of shipments, with the full 50 per cent kicking back in above that ceiling. 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 above that volume would face the existing 50-per-cent tariff — the rate the Trump administration imposed under Section 232 of the Trade Expansion Act, a U.S. law that lets the president levy duties on national-security grounds 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 four-million-tonne figure is a negotiated ceiling, not a free-trade threshold. Once Canadian exporters ship more than that amount in a year, they hit what amounts to a tariff cliff — the rate jumps back to 50 per cent. The structure is what trade economists call a tariff-rate quota, or TRQ: a lower tariff applies inside the quota, a higher one applies above it. Canada uses the same mechanism on the import side for dairy and other supply-managed products.

The deal would also require Ottawa to give something up. Canada would drop all of its retaliatory counter-tariffs on U.S. steel and further restrict imports of steel from third countries, according to the steel executive. The third-country element builds on measures Prime Minister Mark Carney announced on November 26, 2025, when the federal government said it would tighten tariff-rate quota levels for steel from non-free-trade-agreement partners from 50 per cent to 20 per cent of 2024 levels Prime Minister's Office. At the same time, Ottawa said it would continue waiving counter-tariffs on aluminum products beyond January 31, 2026 Prime Minister's Office. Dropping the steel counter-tariffs under this deal would continue that same direction.

Aluminum is also on the table. Canada is seeking to lower U.S. tariffs on aluminum exports, which currently sit at 50 per cent under the same Section 232 regime. Reuters reported that the U.S. could waive the 50-per-cent tariffs and reduce some Section 232 duties on both Canadian steel and aluminum as part of the agreement 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 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 put a domestic-content threshold directly into the bilateral tariff schedule. That is a shift from the regional value-content approach under CUSMA — the Canada-United States-Mexico Agreement — which calculates content across North America as a region rather than country by country. 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, apart from the steel, aluminum and auto negotiations, but it adds to the number of bilateral trade matters converging on the same weeks.

The deal taking shape would be a partial easing of the Trump administration's Section 232 tariffs, not a removal. Canadian steel exporters would gain meaningful relief on the first four million tonnes shipped south, but the over-quota rate stays at 50 per cent, and the concessions Canada would offer in return — dropping counter-tariffs and tightening third-country steel imports — carry real weight. 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.