It was Tuesday, Aug. 18. Late in the day, after weeks of talks, the Canadians were so pessimistic that some of them were piling luggage into a van to head to the Washington airport and come home, when word came that Trump and Carney were speaking by phone and there might be a path to an agreement after all. They filed back upstairs at the Canadian embassy.
Trump announced in a Truth Social post at 10:15 p.m., less than two hours before his midnight deadline, that he would grant a three-day reprieve until Friday, and suspend the new tariffs threatened as reprisal for Canada’s allegedly “discriminatory” practices against U.S. autos, dairy and alcohol. Canada and the U.S. “have a DEAL” subject to the finalization of documents, the president wrote.
U.S. President Donald Trump says he is hitting pause for three days on new tariffs that were set to hit Canada just after midnight. The president says the duties were delayed “based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!” (Aug. 18, 2026)
The Canadian Press
Carney, more cautious, posted only that the two sides had made “significant progress,” and that negotiators still had “important work” to do.
Dominic LeBlanc, Carney’s lead cabinet minister in the talks, returned to Ottawa the next morning for Carney’s briefing of cabinet and premiers. Canada’s lead negotiator Janice Charette, who’d been in Washington since July 27, stayed behind to nail down the text of the deal.
It would all fall apart within three days.
Canada pulls out
Just 20 minutes before the new midnight deadline on Friday, Carney issued a dramatic two-page statement that he had pulled Canada out of negotiations with the U.S.
When he went before cameras the next morning, Carney said he broke off talks because of last-minute U.S. demands the prime minister said would have gutted key sectors of the Canadian economy, particularly autos; exerted U.S. control over Canadian international trade policy; and threatened French-language protections, Canadian culture and sovereignty.
Top American officials claimed it was the Canadians who raised impossible new asks. U.S. Trade Representative Jamieson Greer insisted that Canada had walked away from the best deal on offer to any country.
The Star interviewed Canadian federal and provincial officials, as well as other sources engaged in or briefed on the talks as they unfolded, and agreed not to identify them so they could candidly discuss why it all went off the rails.
Tonda MacCharles reveals the behind-the-scenes account of how a trade deal that both sides thought was all but done suddenly fell apart.
Toronto Star/YouTube
Many blamed U.S. Commerce Secretary Howard Lutnick, who is influential with Trump and has jurisdiction over the so-called Section 232 tariffs applied to Canadian autos, steel, aluminum and lumber in the name of U.S. national security.
Lutnick, who has long been involved in the back and forth over tariffs, showed up at the negotiations being led by Greer in Washington on Monday, Aug. 17. The Canadian side described Greer as a professional negotiator who acted in good faith and believed a fair deal was at hand.
U.S. Commerce Secretary Howard Lutnick speaks with reporters outside a federal courthouse in Washington D.C. on Aug. 27, 2026.
Mariam Zuhaib AP Photo/Mariam Zuhaib
What Canada was never getting
What was never on the table was a zero-tariff deal, according to three senior Canadian officials.
That is something the prime minister first acknowledged last summer but never forcefully persuaded Canadians to accept. All along, he insisted that U.S. tariffs on Canadian goods were illegal and unjustified violations of the Canada-United States-Mexico Agreement on trade (CUSMA), and that “no deal is better than a bad deal.”
Trump has used several laws to impose tariffs on Canada and other allies, striking bilateral deals to reduce the duties only in exchange for major concessions and investment promises. Most Canadian exports were exempt from many tariffs if they complied with CUSMA rules, but Trump’s so-called sectoral tariffs on “strategic” sectors hammered autos, steel, aluminum and lumber, and allowed no exemptions for Canada. Nor would his most recent tariffs, an unprecedented use of a 1930s trade law.
In the latest round of talks, the U.S. position was clear: “The United States has not done a deal with any country in the world whereby the U.S. pays tariffs going into a country,” said one Canadian official. “That’s just not in the cards.
“They won’t even talk to you if you start with that position, so you have to start out accepting that you’re going to pay tariffs going to the United States, and U.S. exporters are not going to pay tariffs coming into your country.”
The sticking points
Reducing the U.S. sectoral tariff on autos from 25 per cent to 15 per cent, with an additional exemption for cars containing 50 per cent U.S. content. But the U.S. refused to budge on any further exemption for Canadian-made auto parts, sources said, meaning the effective tariff rate of about seven per cent would be greater than carmakers’ average profit margin of about six per cent, driving production out of Canada and into the U.S.Cutting the 50 per cent tariff on steel to 25 per cent — but only for a certain volume of Canadian steel products. Above that quota, the 50 per cent rate would still apply under a system called “tariff-rate quotas.” The U.S. also wanted Canada’s tariffs on foreign steel to match its own, to prevent the transshipment of cheap Chinese steel via third countries whether or not Canada had a free-trade agreement with those countries. Meanwhile, said a different Canadian official, there would be “no guarantee that Canadian steel companies wouldn’t be targeted with anti-dumping complaints.”Lowering the 50 per cent tariff on aluminum to 25 per cent. Tariff-rate quotas for aluminum were initially not on the table, but an insider said American companies were “furious” and lobbying the Trump administration for tougher aluminum provisions, including on products made with aluminum. The Americans rebuffed Canadian demands for a guarantee that if the U.S. dropped its tariff rate on another country’s aluminum imports, that Canada would retain a preferred nation differential, meaning tariffs at half the rate charged to other global importers.Eliminating the 10 per cent tariff on lumber, but no change to various countervailing or anti-dumping duties. A long-standing dispute over softwood lumber would be punted to separate talks, but there would be no guarantee that Canadian companies selling into the U.S. wouldn’t face new duties, effectively erasing the gain.
Autos and steel were the biggest obstacles, all the sources said.
“We weren’t just talking about part of the auto industry. We were talking about (all of) the auto industry,” said a senior Canadian official. In Carney’s view, that meant talks about lowering 25 per cent tariffs on autos to 15 per cent included not only cars and light trucks, but also medium and heavy trucks. A Canadian government official said it only became apparent “it did not” on Wednesday, Aug. 19, as the two sides traded wording for the deal’s final version.
U.S. President Donald Trump arrives at Ellington Airport in Houston, Tx., on Aug. 27, 2026.
Mark Schiefelbein/AP
The Americans push back
Greer and Lutnick are now pushing back hard on that suggestion.
“For weeks when I’ve been speaking with my Canadian colleagues, I’ve been clear about what we believe we could deliver, including about autos,” Greer said in a CBC interview. Trump’s tariffs on heavier vehicles were under a separate tariff heading, he said, and “the economics are different, the way it operates are different … the effective tariff rates are different.”
Lutnick claimed the demand to include trucks was “nonsense” that Canada made up to “put an end” to talks, only raising it at 4 p.m. on the last day of negotiations as an excuse to walk out for “political” reasons.
Greer said Canada did a “very Trumpian thing” in the 1960s when it required American automakers that want to sell cars in Canada to build them in Canada. And he said America has not benefited “after many years” of the Canada-U. S Auto Pact, the North American Free Trade Agreement and CUSMA.
“We have a big gap in our manufacturing employment here” in the U.S., he said, “and autos is a big part of that.”
On steel, Greer denied there was any text that would have required Canada to give up its sovereignty, but he noted for the past year and a half Canadian federal and provincial officials pledged they wanted to form a “Fortress North America — their term, not mine.” And so, he said, “when it comes to things like steel and aluminum, the idea is if we’re going to lower our tariffs and give you the best deal in the world on steel and aluminum, we can’t have Canada be a place where you can get flooded with steel and aluminum from other countries and be used as a backdoor to the U.S.”
Greer also flatly denied Carney’s claim that U.S. proposals threatened protections for the French language and culture. The U.S. insists that American streaming platforms should not be “taxed” by a foreign government to support Canadian media production or be forced to promote their competitors’ content online. In any event, he said, “discoverability” of French programs on sites like Netflix was never a “red line.”
As the two sides went back and forth last week, it was clear pressure was mounting inside and outside the negotiating rooms. “Yes, there were raised voices on occasion, as you would expect, on both sides,” said one insider.
A skeptical Ontario premier
When Carney briefed Premier Doug Ford before the Wednesday first ministers’ meeting, Ford had immediate reservations. Ford had sent Carney a letter two days earlier warning against accepting too many concessions. He was “frustrated” and “worried,” sources said, about a “bad deal” that would see Canada accept tariff levels that, although reduced, would drive Ontario’s automotive and steel industries into the ground within a few years. Yet Ford was also reluctant to break ranks with a “Team Canada” approach, which was already strained by divisions over provincial bans on U.S. booze sales and calls to slap tariffs on Canada’s energy and potash exports to the U.S.
In trying to bring the premiers onside, Carney and his officials told them that, under the circumstances, the offer on the table was “the best deal” because it achieved Canada’s three main goals:
Halting the immediate threat of new 50 per cent tariffs on nearly $28 billion worth of Canadian products with no exemptions;Lowering existing tariffs on autos, steel, aluminum and lumber, and ensuring Canada faced the lowest U.S. tariff rates as benchmarked against other countries;Launching CUSMA renegotiations, which had been in limbo since the U.S. refused to renew that trade agreement beyond its expiry date in the next decade.
To secure the deal, Carney told the premiers they would need to lift their bans on U.S. alcohol sales and end “Buy Canadian” contract restrictions on American companies.
Manitoba Premier Wab Kinew publicly balked. Ford talked to Kinew and other premiers but stayed silent himself, fuming and taking calls from worried automotive and steel CEOs, as well as industry and union representatives. Stakeholders said the federal negotiating team “went back into their black box” — refusing to release specific numbers, even to premiers.
‘Lutnick started pilfering the agreement’
However, by 10 p.m. on Wednesday in Washington, the warning signs were clear.
Charette called the prime minister and LeBlanc to say, “We have a problem.”
As wording of text was being sent back and forth, the Canadian side says the Americans were narrowing the scope of what Ottawa thought was agreed to, particularly on autos.
“Lutnick started pilfering the agreement,” said a stakeholder. “It would have been the total erosion of the automotive sector within the next 10 years in Canada.”
On the other hand, another Canadian stakeholder said, it wasn’t just Lutnick’s interventions that were raising the tension. On Thursday morning, Carney sent his chief of staff, Marc-André Blanchard, down to Washington with LeBlanc, where they would be joined by Canadian Ambassador to the U.S. Mark Wiseman at the ever-intensifying talks.
That shifted the dynamic from the American perspective.
“What I got told from the Greer people is, ‘Look, we have tremendous respect for Janice and Dominic. We think the chemistry has been very good. We’ve been honest with each other. We’ve been dealing with very substantive technical issues,’” the stakeholder said.
Chief trade negotiator Janice Charette.
Patrick Doyle/The Canadian Press
“And then when that happened, they started saying like, ‘OK, now we have four of them there. We’re not even sure they’re aligned. We think they all have different agendas, and we think at least one or two of them is not even here to help get the deal done.’”
On Friday, a source said, Carney spoke to Ford as talks continued, and “the prime minister asked for a few hours, and then it was early evening, and then it was, you know, later in that evening.”
Ford was angry at how things had been unfolding. “It wasn’t necessarily that he was frustrated or angry at Carney or (LeBlanc), but he was definitely angry at the deal that was coming together and … he firmly believes that no deal is better than a bad deal, and we were looking at a bad deal,” the source said. “So all of that culminated Friday evening, the premier being crystal clear with the prime minister that he was not prepared to support the deal.”
Ford told Carney, “I will not put U.S. alcohol back on LCBO shelves. I will not change my procurement policies. I’m not participating in this deal,” according to a source with knowledge of their conversation.
Federal officials deny Ford’s opposition was the deciding factor for Carney to break off talks.
“Ultimately, the decision the prime minister had to make on the Canadian side was, overall, was this deal good enough for Canada?” said a federal official. “In the end, it just wasn’t good enough.”
And so at 20 minutes to midnight last Friday — just before the Trump reprieve expired and his new 50 per cent tariffs would apply — Canada quit the talks. Carney did not speak to Trump that day.
‘Saved from a bad deal’
“Instead of partnership, Canada chose unreasonable demands, walk-backs, and flat-out rejection,” the Trump White House said in a “fact sheet” sent out this week to ostensibly set the record straight.
CNN reported that Trump himself appeared to admit that the U.S. had indeed raised new conditions in the late stages of negotiations. “That sounds like me,” he told CNN reporter Jim Sciutto.
Greer told CBC that it was just an off-the-cuff remark, and that the U.S. president had had a “meeting of minds” with Carney on the Tuesday night before Canada bailed.
“I don’t know what ended up happening,” Greer told CBC’s Rosemary Barton. “You read things in the press about premiers and different things like this and politics going on. I don’t know. All I know is … Canada has had the best deal. We offered an even better deal. It would have been a springboard for future progress for us, and now that is that’s gone away.”
In the wee hours of last Saturday morning, as the bombshell news sank in and Trump’s latest tariffs kicked in, texts flew across the country and across the border.
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Carney “was saved from a bad deal,” said one stakeholder representing affected workers.
Another stakeholder, who represented affected businesses, took a dimmer view. “At the end of the day, we’re a beaver who picked a fight with an elephant,” they said.
“And eventually the elephant’s gonna say, ‘Hey, you’re still a beaver. I like you, but we’re not equals. I’m 10 times your size, right? And you had a good thing going and yeah, we started it, but you guys made it a lot worse.’”