Inside the collapse of the Canada-US trade deal

“It was an awesome meeting,” Pete Hoekstra, U.S. ambassador to Canada, recently told POLITICO.

It went so well that President Donald Trump invited Carney and his delegation back into the Oval Office to show off his White House ballroom plans, even asking the prime minister for advice on the design. The Canadians were then ushered into a nearby office and offered Trump-branded memorabilia.

Sixteen days later, the talks collapsed.

Trump blamed a C$75 million anti-tariff ad campaign launched by Ontario Premier Doug Ford, calling it “egregious” and “fake.” But interviews with officials on both sides of the border suggest the ad, which featured comments from Ronald Reagan, was just “a pretext.”

Behind the scenes, the North American auto sector was growing frustrated about being left out of the agreement. Tensions escalated after Carney’s Liberal government threatened Detroit automakers and raised the cost of importing vehicles into Canada, eroding the goodwill from that Oval Office meeting.

On that Oct. 7 trip to the White House, there was an expectation that Carney and Trump would strike a deal, one the president said Canadians would be “very happy” with.

Senior U.S. officials, including Interior Secretary Doug Burgum and Energy Secretary Chris Wright, attended and were visibly enthusiastic about part of the deal that would increase Canadian oil exports “a few more million barrels of oil a day to the United States,” Hoekstra said.

During the discussion, Carney brought up the Keystone XL pipeline, which would transport oil from northern Alberta to the U.S. Midwest. “They almost jumped across the table to embrace their Canadian counterparts,” said Hoekstra. “They were thrilled.”

While he’s not part of the negotiating team, Hoekstra said there were discussions on aluminum, talks on uranium — “because both countries are firmly committed to nuclear”— and an agreement on steel, “which would have been a big benefit to the auto industry on both sides of the border.”

The deal would have introduced tariff-rate quotas on steel, permitting a fixed volume to enter at lower tariffs before higher duties applied beyond that threshold, according to an official familiar with the Canada–U.S. trade talks. The individual, like others interviewed for this story, was granted anonymity to speak candidly about the negotiations.

“They were having a good time,” Hoekstra said.

Leaving that day, both teams were instructed to flesh out the agreements “and we’ll be back before Thanksgiving and have this done,” he said.

“There was a genuine feeling around the table that we’ve made significant progress, that we could have an interim deal.”

That never happened.

The Reagan ad

One week after Carney returned from the Oval Office, Doug Ford announced his Progressive Conservative government was spending C$75 million to run an anti-tariff ad in the United States featuring a voiceover from a 1987 speech by former President Ronald Reagan.

The ad first aired on Oct. 20, during the Major League Baseball playoffs. Trump initially seemed impressed by the commercial. “If I was Canada, I’d take that same ad also,” he proclaimed the next day.

But three days later, he ended trade negotiations with Canada, calling the ad “egregious”and “fake.”

“It’s not just an ad, by like, Dawn dish detergent or something,” Hoekstra said. “There has never been an ad run against the president of the United States and his agenda by a foreign government in the United States of America. That does not happen.”

At that time, Canadian and U.S. officials were putting a framework of their deal “on paper” Canada’s former chief negotiator Kirsten Hillman advised a Senate committee in Ottawa in October.

Hoekstra insists it was the ad that ultimately “blew up the deal.”

But three officials familiar with the negotiations say talks had already started to fall apart.

Concerns were growing that the auto sector was being left out of the deal, along with backlash over Industry Minister Mélanie Joly’s threats against U.S. automakers, which added another irritant to high-stake negotiations.

Getting Detroit’s attention

While the public fallout over the ad made headlines, it was finer policy details out of Ottawa — particularly around autos — that alarmed Detroit.

On Oct. 15, the day after Ford announced the anti-tariff ad, Canada’s industry minister wrote to Stellantis chief executive officer Antonio Filosa threatening to sue the company over its decision to move its Jeep production plant from Brampton, Ontario, to Belvidere, Illinois.

After the companies announced plans to cut jobs or scale back vehicle production in Ontario, Joly also threatened to claw back millions the government of Canada had doled out to Stellantis and GM.

Detroit automakers continue to be squeezed by tariffs from both sides of the border. Like steel and aluminum, vehicles that are assembled in Canada are subject to U.S. Section 232 tariffs when they head south.

At the same time, Canada has imposed retaliatory tariffs on U.S.-made vehicles, as well as steel and aluminum. To prevent major disruptions in the auto sector, Ottawa created a system to refund those duties to U.S. automakers so that they could still import vehicles and stock dealerships across Canada — but only if they maintain jobs, production and investment in Canada.

On Oct. 23, Finance Minister François-Philippe Champagne and Joly reduced how many vehicles Stellantis and GM could import tariff-free, effectively raising their costs.

That evening, Trump abruptly halted “all trade negotiations” with Canada. While the president blamed the high-profile Reagan ad for the collapse in talks, one official familiar with talks between auto executives and White House officials, claimed the ad was largely “a pretext.”

“They now started to pay a tariff to bring cars into Canada, both Stellantis and General Motors, and that’s what really triggered them and sent them to the White House,” the official, who is familiar with their conversation, said.

The official alleged the real issue had to do with mounting frustration within the auto sector over how Ottawa was handling the file, a view echoed by two other officials, one of whom said the breakdown had more to do with industry anger over the Canadian government’s “posturing” on autos.

Premier Ford’s office declined to comment.

Stellantis and GM did not respond to questions about whether it raised its concerns about Canada with White House officials. In a statement, Stellantis said it remains “focused on a strong Canadian footprint” and is in active discussions with government officials and key stakeholders.

Joly didn’t respond to the claims; neither did Canada-U.S. Trade Minister Dominic LeBlanc, though his office said in a statement he has a goal of “getting the best deal for Canadian workers and families.”

One of the officials, based in Canada, said Joly’s actions “inflamed a very important ally,” noting that U.S. automakers have been key partners in making the case for integrated cross-border supply chains.

“It is not going to be Canadian politicians or Canadian businesses that convince U.S. lawmakers or President Trump to eliminate tariffs and to get back to free trade,” the Canadian official said. “It is going to be American businesses and we have to be very, very careful in how we treat those partners.”

Missing magic

Canada and the U.S. restarted trade discussions in March, and as Hoekstra puts it, “we have not recreated the magic moments of October of 2025.”

Canada, the U.S. and Mexico now must decide by July 1 whether to renew the United States–Mexico—Canada Agreement for another 16 years; otherwise, talks would continue until issues are resolved or the pact expires in 2036.

“We understand that there are conversations occurring, but that they’re not robust. They’re certainly not sitting down and dealing with the issues,” one of the officials said.

Ahead of the review, Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, is calling on both sides to bring down the temperature.

“We’ve got to focus our efforts on the root of the problem, which is Section 232 tariffs and uncertainty around [USMCA]. We all have the same objective, get rid of the tariffs, and renew our trade deal. Let’s get back to the negotiating table,” he told POLITICO.

Both Canadian and U.S. officials have since accused one other of not meeting at the table, and both sides have said they are looking for a bigger deal than what could have transpired in October.

“We need a good deal in the right time, and what we don’t need is chasing a small deal that disadvantages us,” Carney told CBC News last week — a variation of a line he often repeats when asked why he has yet to deliver for Canadians.

The president wants the same.

“We’ve indicated that we have an interest in doing a bigger deal. The president expressed that the first time that he and the prime minister met,” Hoekstra said.

“We’ve been very open and forthright in terms of where we want to go and what we need to get done.”