Trump tariffs: What India can learn from Canada’s failed trade talks with the United States

Canada’s firm stance on suspending trade negotiations with the United States and the Donald Trump administration’s unpredictable policies offer key lessons for India, according to Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI).Canada canceled its trade negotiations with the United States on August 21, 2026 and withdrew its negotiating team after realizing that Washington was only offering limited tariff relief in exchange for concessions that could undermine Canadian manufacturing and limit the country’s sovereignty.The United States described the breakdown of three days of intense trade negotiations with Canada as a “missed opportunity” after Ottawa suspended talks and instructed its negotiating team to return home, while Washington imposed 50% tariffs on Canadian goods.U.S. Trade Representative Jamieson Greer said Canada had refused to conclude a deal even though he said the United States had offered to give Canada “the best deal for any major exporter” accessing the U.S. market. Greer said Canada’s introduction of new demands and revisions to commitments made earlier in the talks had upset the balance reached by negotiators.Ottawa said it would introduce “dollar-for-dollar” retaliatory tariffs starting September 8. The move ended talks that had begun on February 1, 2025, after the first round of new US tariffs were imposed.

Why trade negotiations between the United States and Canada were important

The negotiations were notable because Canada and the United States have enjoyed more than three decades of free trade. The agreement began with the North American Free Trade Agreement, which came into force in 1994, and was later replaced by the United States-Mexico-Canada Agreement in 2020. The USMCA continues to operate and allows most qualified North American products to move between countries without tariffs.The need for a new agreement arose after Donald Trump’s administration introduced additional tariffs outside the USMCA framework, in addition to the standard World Trade Organization, or most favored nation, tariffs.Among the measures were Section 232 national security tariffs of up to 50% on Canadian steel, aluminum, copper and related products, along with 25% tariffs on automobiles and parts. Washington also introduced separate tariffs covering lumber and wood products.Additionally, the United States applied a 10% tariff under Section 301 to a wide range of Canadian products, arguing that Canada had not done enough to enforce its ban on imports linked to forced labor.He later used Section 338 to impose 50% duties on certain Canadian exports, including wine, cement, hockey equipment and other consumer products. Some of these tariffs were even imposed on goods that complied with the USMCA rules of origin.“WTO violating” tariffs reduced the trade certainty that the USMCA was intended to provide. Therefore, Canada began bilateral talks seeking waivers, significant tariff cuts, and safeguards against additional unilateral measures ahead of the 2026 joint review of the USMCA.

The United States offers small concessions

The GTRI lists the limited and conditional relief that the United States was willing to provide while continuing to introduce new demands.The United States proposed reducing tariffs from 50% on steel and aluminum to 25%, but linked the reduction to restrictive quotas.The United States offered to reduce the tariff on Canadian-made vehicles from 25% to 15%, but refused to provide the same treatment to medium and heavy trucks. This would have put the Canadian-made Ford F-350, F-450 and F-550 pickup trucks, along with General Motors’ Silverado, at a disadvantage.The United States proposed temporary protection against the broader Section 338 tariffs and suggested postponing 50% tariffs on about $20 billion in Canadian agricultural and consumer exports. However, the relief was reportedly tied to strict import quotas, concessions related to Canada’s supply management system for dairy and other agricultural products, and the removal of provincial restrictions on sales of American alcohol.The most contentious issue involved demands that went beyond traditional trade policy. The United States wanted Canada to face limits on its ability to negotiate trade deals independently, while also seeking preferential access to critical Canadian minerals.

Why did Canada cancel trade negotiations?

Canadian Prime Minister Mark Carney called the last-minute conditions presented by Washington “uneconomic” and “unfair,” saying the United States had demanded too much and offered too little in return.Ottawa determined that the proposed deal would maintain significant U.S. tariffs while restricting Canada’s freedom to manage its trade relations, strategic resources, agricultural system and cultural policies.Canada will now impose equivalent duties on select U.S. imports, including steel, dairy products, appliances, agricultural machinery, pulp and paper, and electronics.Carney accepted that retaliatory measures would drive up prices in the country and limit consumer choice. However, he argued that accepting an unbalanced deal would inflict greater long-term damage to Canadian industry and sovereignty.

What this means for India

According to GTRI’s Ajay Srivastava, for India, which is negotiating its own trade deal with the United States, Canada’s experience offers a cautionary tale.“New Delhi should seek clear, binding and lasting tariff concessions before making commitments on agriculture, digital regulation, critical minerals or government procurement,” he says.“A deal that simply reduces some US tariffs while leaving Washington free to impose new tariffs under Sections 232, 301 or other domestic laws would offer little certainty,” he adds.Therefore, India should safeguard its regulatory and strategic autonomy and avoid making unilateral concessions outside the negotiation process. Any concessions should be made only when the benefits are balanced, enforceable and protected from future unilateral tariff measures, it concludes.India and the United States remain involved in talks for a trade agreement. The Trump administration reduced tariffs from 50% imposed last year on India to 18% in February. However, the US Supreme Court later ruled that Trump’s reciprocal tariffs are illegal. Since then, the Trump administration has been looking for ways to impose tariffs on countries around the world.