Canada is racing the clock to stop a new 50% tariff on billions of dollars of its goods. If no deal is reached by the end of Tuesday, the tax kicks in at 12:01 a.m. Wednesday, Washington time.
The tariff would hit an estimated $20 billion of Canadian exports. That is about 5% of everything Canada sells to the U.S.
The list includes hockey equipment, dairy and liquor. Energy, the largest share of Canadian exports, is not covered.
The move relies on Section 338 of the 1930 Tariff Act, a rarely used trade law that Trump invoked for the first time in July. Prime Minister Mark Carney called the negotiations "intense" after a weekend of talks between Canadian and American officials.
Carney and President Donald Trump spoke by phone Monday afternoon, though Trump gets the final call on whether the duties actually go into effect.
The two sides are split on cars. The U.S. charges 25% of a vehicle's value, excluding American-made parts.
Canada asked for a lower figure, but U.S. officials rejected going below 15%, the rate they apply to South Korea and Japan.
There is more on the table. The U.S. wants several Canadian provinces to drop their year-old ban on American wine and liquor, which Canada imposed to retaliate against earlier Trump tariffs.
Canada, in turn, wants the U.S. to cut tariffs on aluminum, steel and vehicles, and it objects to U.S. lumber duties.
A late-July Nanos Research poll for Bloomberg News found 77% of Canadians support keeping the provincial retail ban on U.S. alcohol.
Eighteen percent want it lifted, which makes it politically hard for Canadian leaders to give ground.
Ontario Premier Doug Ford has said he will maintain the ban unless the U.S. offers meaningful tariff relief, and every Canadian auto assembly plant is in his province.
Eric Miller, founder of Rideau Potomac Strategy Group, said the Canadian public is "reaching the end of its patience" with the Trump administration.
The tension has been building for a while. Trump once threatened to "permanently shut down the automobile manufacturing business in Canada," and his suggestions that Canada become a 51st state have already cut Canadian travel to U.S. border areas and Las Vegas.
The bigger risk is the USMCA, the North American trade deal negotiated in Trump's first term. Unless the agreement is renewed by all three partners, it runs out in 2036, and the U.S. has said the current version is not acceptable.
Trump has said he would be fine without any North American free-trade pact. Canada's cumulative GDP would fall C$271 billion ($195 billion) over the same stretch. A successful renegotiation that removes investment uncertainty would raise output in both countries.
The two economies are deeply tied, with the U.S. and Canada trading nearly $900 billion in goods and services last year.
Trade lawyer Barry Appleton, co-director of the Center for International Law at New York University, said the U.S. is "convinced that this is a game of space and are convinced the Canadians are going to swerve."
Jamieson Greer, the U.S. Trade Representative, said Friday at the Milwaukee State Air that Canada must appeal all trade measures. Any plausible resolution, he said, has to include all of them that are a clear path forward.
Tariffs are also a tax on things people buy and sell. When they hit, companies often pass the cost along, which can show up in prices at the store or in the margins of the businesses you own.
This dispute is also a reminder that trade policy can move markets even before it moves goods. The uncertainty alone is a cost, and it lands hardest on companies with supply chains that cross the border.
For investors, the useful question is not whether the tariff lands on Tuesday. It is what companies say about their costs in the weeks after.