A potential agreement aimed at preventing new U.S. tariffs on Canadian products is now before President Donald Trump, according to three people familiar with the negotiations. The sources were granted anonymity because of the sensitive nature of the discussions.

Trump must now decide whether to allow the 50 percent tariff to take effect as planned at midnight.

U.S. and Canadian officials have spent several days in intensive negotiations. The Trump administration is urging Canada to withdraw retaliatory measures imposed in response to last year’s U.S. tariffs, including provincial restrictions on American liquor and tariffs targeting U.S. automobiles. Ottawa, meanwhile, is seeking reductions in U.S. duties on automobiles and other products. The emerging agreement would also reportedly include Canadian concessions involving its dairy tariff-rate quota, a longstanding point of contention for Trump, according to two of the three people familiar with the talks.

Negotiators hope an agreement covering those issues could pave the way for broader discussions over the North American trade agreement scheduled for review this year. Automobiles, however, continued to present a major obstacle Monday as American and Canadian officials met throughout the afternoon, according to three additional people familiar with the negotiations. Although the tariffs scheduled for Wednesday would affect only a limited portion of bilateral trade, they could complicate broader negotiations covering nearly $1 trillion in goods and services exchanged between the two countries.

“You can think of it as effectively trying to come up with an early harvest, an interim deal, a smaller package of what ultimately will land as part of the USMCA talks,” said Kelly Ann Shaw, who served as deputy assistant for international economic affairs during Trump’s first term.

The negotiations carry significant political consequences for both governments. Canadian Prime Minister Mark Carney, who previously invoked a hockey-fighting slogan to characterize his approach toward the United States during last year’s campaign, is now facing demands from U.S. officials for Canada to scale back longstanding trade protections, including reforms to the supply management system covering industries such as dairy and lumber.

There’s going to be a political cost for Carney on any type of concession with some portion of the public,” said an industry figure, granted anonymity to speak candidly about the trade discussions. “I cannot understate how upset the average Canadian is with the United States, and really specifically with Trump.”

Allowing the tariffs to take effect could also increase economic pressure on the Trump administration ahead of the midterm elections, particularly in Maine and Michigan, two states that could play an important role in determining control of the Senate.

At the end of the day, [U.S. Trade Representative Jamieson] Greer cannot bring something to the president that doesn’t address some of the president’s personal core concerns,” Shaw said. “And I think Carney recognizes he’s got to bring something back where he can say, ‘Look, not only are we just at the table, but we actually got something for it.’”

The White House did not respond to a request for comment. Gabriel Brunet, spokesman for Canada-U.S. Trade Minister Dominic LeBlanc, said the Canadian side was “in a holding pattern at this time.”

Trump set off the latest round of negotiations last month when he invoked a tariff law dating to the Great Depression to impose duties on a broad range of Canadian products, including hockey equipment and Canadian bacon. The measures were conditioned on Canada removing tariffs on U.S. automobiles, ending provincial restrictions on American alcohol and changing its dairy supply management policies. Trump’s proclamation provided a one-month delay before the tariffs would take effect, giving negotiators additional time to reach an agreement. The tariffs are scheduled to begin at midnight Aug. 19.

When Trump announced the measures, trade specialists viewed them as an effort to push Canada back to the negotiating table after months of stalled progress and mounting frustration among U.S. officials.

“I think these three issues must be resolved before Canada can get into the room on USMCA with the United States,” said a former USTR official, shortly after Trump unveiled the new tariffs on Canada last month. “And the U.S. side is wanting a situation where Canada is in the room and so they’re trying to help prompt fixes to these three.”

Automotive tariffs have since become one of the most difficult issues in the negotiations. Canada wants the 25 percent automobile tariffs Trump imposed last year on countries worldwide to be reduced. Ottawa also wants the tariff to apply only to vehicle content manufactured outside North America, according to one person familiar with the discussions.

The auto issue could also help determine whether the two countries make progress on other U.S. demands. Washington has insisted that American wine and spirits return to Canadian store shelves as a key condition of the talks. Responsibility for those restrictions, however, rests with individual provinces, meaning any resolution would require support from premiers such as Doug Ford of Ontario, a major center of automobile manufacturing.

Whether Ford ultimately backs down will “come down to where we land on autos,” one person familiar with the negotiations said, describing the automobile issue as a “domino” within the broader talks.

Ford used his authority over Ontario’s liquor stores in March 2025 to remove American alcohol from shelves across Canada’s most populous province. Other provinces followed with similar measures, causing an estimated loss of nearly $150 million for the U.S. distilled spirits industry alone. Alberta and Saskatchewan later ended their restrictions after only a few months, but together they represent less than 20 percent of Canada’s population.

Even if provincial governments lift their restrictions, American alcohol producers may not immediately regain Canadian consumers. Public anger toward Trump remains significant, particularly following his repeated suggestions that Canada should become the 51st U.S. state.

“I would be surprised, even if the liquor goes back on the shelves, if Canadians buy it,” said the industry figure.

Trump administration officials have repeatedly criticized Canada for being one of only two countries, alongside China, to retaliate against his tariffs. At the same time, the administration is pressing Ottawa to dismantle or loosen longstanding protections for Canada’s dairy industry, another source of friction between the neighboring countries.

Canadian negotiators LeBlanc and Janice Charette have been seeking reductions in U.S. national security tariffs affecting automobiles as well as steel and aluminum. The Trump administration, however, has maintained its position on the 50 percent tariffs covering steel, according to three people familiar with the metals negotiations.

“That’s probably going to be something that is much more of a longer term” discussion, one of the people said, “if at all.”

Greer told reporters last week that he remains pleased with the steel tariffs and their effects on the U.S. steel sector.

“This is working,” he argued, pointing to increased domestic steel production. Through mid-August, U.S. steel production had risen by more than 5 percent compared with the same period a year earlier, according to the American Iron and Steel Institute, while capacity utilization had increased by two percentage points.

“We’re seeing huge success in the American steel industry, which is exactly what President Trump wanted,” Greer said during a trip to Iowa Thursday.