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Investing.com -- Canadian officials are considering a proposal that would accept U.S. auto tariffs in exchange for reduced levies on vehicles that comply with USMCA rules, The Globe and Mail reported Wednesday.
The proposal would preserve an exemption for the value of American content in cars exported from Canada.
Canadian and American negotiators have reportedly discussed this proposal. Canada's negotiating team had talked about the plan but it remains unclear whether they have presented it to their U.S. counterparts. The proposal has also been discussed with Canadian industry.
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Prime Minister Mark Carney has committed to reaching a deal that reduces U.S. President Donald Trump's tariffs on autos, steel, aluminum and forestry products. The outlines of an agreement for steel and aluminum have been clearer than one for autos. The two sides aim to reach an agreement by Aug. 19, when Trump has threatened to impose tariffs of 50% on an additional $20 billion of Canadian exports.
The auto industry is central to the bilateral trade relationship and politically important. The United States wants Canadian premiers to end their bans on American alcohol sales as part of the deal, which would require approval from Ontario Premier Doug Ford, whose province contains most of the country's auto industry.
Under the plan, Trump's auto tariff would be reduced from its current rate of 25% on all Canadian auto exports that comply with the United States-Mexico-Canada Agreement. The tariff was imposed under Section 232 of the Trade Expansion Act of 1962.
All U.S. content in Canadian-made autos would continue to be excluded from the tariff calculation. If a Canadian-made car contains 50% U.S. content, the tariff would be charged on only half the value of the car.
Canadian officials had also discussed a proposal to apply the tariffs only to content in a vehicle that originated outside North America, which would reduce the levies to a small amount.
Canadian negotiators have reportedly consulted with industry leaders to determine acceptable concessions. The auto sector has indicated it could manage a tariff of 10% to 15% if U.S. content in the car were not subject to the levy, according to the report. About 50% of a Canadian-made car originates in the United States due to the two countries' integrated supply chains.
Negotiators have also consulted with agriculture, steel and aluminum industry representatives.
It remains unclear how receptive U.S. negotiators would be to the idea of a reduced auto tariff.
