One big, grand trade bargain with the U.S.? The devil is in the sectoral details

Wolfgang Alschner holds the Hyman Soloway Chair in Business and Trade Law at the University of Ottawa.

Canada is reportedly negotiating concessions with the United States in exchange for tariff relief on a wide range of sectors, as an Aug. 19 deadline for additional duties looms. Understandably Prime Minster Carney is aiming for a “global deal” that would comprehensively address trade frictions from steel to lumber. But even a global deal must weigh co-operation sector-by-sector.

That is because the U.S. is trying to build industry-specific parallel markets partially delinked from global commerce. In some sectors, Canada may benefit from teaming up with the U.S., in others it does not.

Take the latest U.S. trade action. On Aug. 6, the United States imposed import restrictions on polysilicon, a crucial input for semiconductors and solar panels and derivative products. This latest “Section 232” action to reshore industries relevant to national security also applies to Canada. Its commercial significance is minor. Only $20-million dollars’ worth of Canadian exports will be affected based on 2025 Statistics Canada data. The measure does, however, illustrate the trade-offs involved when Canada is considering working with Washington on trade policy.

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The new polysilicon measure does three things to create a “commercially viable market” in the U.S. First, it sets up a new tariff of 15 per cent for imported polysilicon derivatives, including solar cells to generate demand for domestically sourced polysilicon. Importantly, trading partners that impose “substantially equivalent import-adjusting action” can gain exemptions. That creates incentives for other countries to join the U.S.-led efforts under the Pax Silica initiative, a loose framework that includes Australia and the EU, but not Canada.

Second, more unusually, the new measure sets a minimum import price enforced by a draconian remedy. The product-specific price floors insulate the U.S. from fluctuations in international markets. Traders that import below that price will be permanently barred from importing polysilicon and derivative products into the U.S. That will ensure high compliance.

Third, specific companies can be temporarily exempted if they make certain substantial investments in the United States. Linking company-specific tariff reprieve to onshoring efforts was pioneered in the pharma and semiconductor tariffs and will likely become a permanent feature of U.S. Section 232 tariffs.

For Canada, costs outweigh benefits in joining these latest U.S. efforts. Price floors would violate Canada’s international trade commitments, be a nightmare to administer and create inflationary pressures because Canada imports more than it exports. Imposing “substantially equivalent” tariffs would also make Canadian trade policy dependent on Washington’s choices. Finally, the reshoring program could push Canadian companies to relocate to the U.S.

Joining the U.S. effort on polysilicon thus makes little economic or policy sense. If anything, climate benefits and the local economic gains from installing solar energy weigh in favour of liberalization, not protectionism.

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In other sectors, however, the U.S. offer underlying the Section 232 actions makes for a more attractive bargain.

On steel, for example, joining the U.S. in building markets delinked from global distortions is sensible. Indeed, it is already happening. Canada’s tariff-rate-quota regime put in place in June, 2025, acts as de facto steel tariff and price floor “substantially equivalent” to the U.S.’s 50-per-cent Section 232 tariff on steel.

The EU imposed its own steel tariff-rate-quotas in July, 2026, carefully designed not only to protect its domestic industry but to remain compliant with international trade obligations. Negotiations have also heated up at the long-standing Global Forum on Steel Excess Capacity hosted by the Organisation for Economic Co-operation and Development, a grouping of mostly Western states, to coordinate joined trade action. Before the end of the year, we may see a Western steel club emerging.

Finally, steel companies already operate on both sides of the border and existing trade deals struck by the U.S. with the U.K. and others offer templates to manage steel trade. There is thus a strong case for aligning trade policy with the U.S. on steel.

On critical minerals, by contrast, cooperation with the U.S. must be evaluated mineral-by-mineral. As a recent report by the World Economic Forum suggests, the appropriateness of policy interventions depends on the market conditions of specific minerals. While price floors can make sense for emergent markets such as lithium, they are less suitable for mature markets such as copper or niche markets such as gallium or germanium, which have important industrial and defence uses but tend to be mined as by-products. Moreover, while the U.S. and Canada have converging interests in alternative rare earth supply chains to break China’s quasi monopoly, they evidently lack common ground on aluminum trade, another critical mineral.

In short, while a global deal is desirable, what bargains benefit Canadians must be assessed sector-by-sector.