Trump pauses new tariffs on Canada and says countries close to a deal

US President Donald Trump said he will delay imposing new tariffs on a wide array of Canadian goods for three days as the countries firm up a trade deal.

"I have paused the 50% Tariffs against Canada, that were scheduled to kick in tomorrow morning for a three day period, based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!" Trump said in a social media post.

The announcement came less than two hours before a 50% levy on nearly $20bn (C$28bn) of Canadian imports were set to go in place.

The two sides have been at an impasse on several issues, including US tariffs on autos and many Canadian provinces banning American liquor sales.

Trump and Prime Minister Mark Carney spoke twice this week, and trade negotiators have been engaged in intense talks since July, after Trump threatened the new levy with a deadline of 19 August.

"Substantial progress has been made, although there is important work still to be done," Carney said in a letter posted on X.

In his post, Trump also said a final trade deal could allow the revival of the Keystone XL pipeline. The oil pipeline, which would connect Alberta to the US, was blocked by both the Obama and Biden administrations.

Environmentalists and indigenous groups have long opposed the pipeline but Trump has said multiple times he would like to revive the project, which would carry 830,000 barrels of oil a day.

"The great Keystone XL Pipeline, long ago killed by Sleepy Joe Biden, may be awoken from the grave!" Trump wrote on Truth Social.

"The deal will include comprehensive market access for all American goods, economic security commitments, digital trade alignment", the US Trade Representative posted on X.

It will also include "many important provisions that will continue to protect our market and American workers, along with our Canadian partners", it added.

The extension is welcome news for Canadian negotiators and for businesses on both sides of the border, who have warned that the new tariffs would be harmful to both countries.

Tensions have mounted between the two major trading partners since Trump returned to office in January last year and he unleashed a wide-ranging global programme of tariffs, upending decades of free trade between Canada and the US.

The latest tariffs threatened by Trump were to be applied on a range of Canadian imports, including wine, dairy, cement, clothing and hockey equipment.

They would have been in addition to existing tariffs the US had already imposed on Canadian steel and aluminium, autos and lumber.

Canada has been in pursuit of a deal that would have the US drop or reduce tariffs on these key sectors.

The US, meanwhile, has been asking for a number of concessions from Canada, including removing its remaining retaliatory tariffs on American autos and adjusting its dairy quotas to allow greater access for US cheese producers.

It has also asked for the ban on US alcohol sales, imposed last year by most Canadian provinces in retaliation to Trump's tariffs, be removed.

In the final hours before Wednesday's deadline, negotiators were discussing a deal that would reduce US tariffs on Canadian autos from 25% to 15%, according to a Reuters report citing anonymous sources.

But the two countries could not agree on which vehicles would be eligible for tariff reductions, with the US pushing for it to only apply on cars with a high amount of American-made content.

Carney will also need buy-in from provincial premiers to reinstate the sale of US alcohol, as liquor sales are controlled by the provinces, not the federal government.

Ontario Premier Doug Ford, whose province is hardest hit by US tariffs on autos, said he was open to lifting the liquor ban only if a "fair deal" is reached.

On Tuesday, the US Chamber of Commerce pushed for a deal to be reached, saying in a statement that "higher tariffs would damage both economies, drive up costs for US families, further disrupt critical supply chains, and risk the 13 million American jobs that depend on trade under the US-Mexico-Canada Trade Agreement".