Trump to ease 50% Canada tariffs on farm equipment, packaging goods

The Trump administration is purportedly preparing to lift its 50% tariffs on a range of Canadian goods used in farming, food production and packaging, a targeted rollback that comes as negotiations between Washington and Ottawa remain frozen.

Maine's Republican Senator Susan Collins said in a statement Friday that the exemptions span nine product categories including corrugated paper and boxes, some plastic packaging materials, refrigeration and freezing equipment, and machinery for cleaning, sorting and grading crops. Certain packaging machinery and seaweed and algae food products are also on the list.

The Wall Street Journal, citing people familiar with the plans, reported Friday that a proclamation altering the duties could come within the day. The Journal said the relief could be offset by higher levies on other Canadian imports.

A White House official told the news outlet that any tariff announcement would come directly from the administration and that preliminary reports were speculation. The office of the U.S. Trade Representative, which administers the tariffs, declined to comment.

Collins said she lobbied U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick for the changes, framing the move around input costs for producers.

“Many of our farmers and growers rely on specialized equipment, packaging materials, and other products from Canada that are either unavailable from American suppliers or cannot be replaced without incurring significant expense,” she said.

How the current Canada tariffs took shape

The duties rest on Section 338 of the Tariff Act of 1930, the Smoot-Hawley-era law that had never before been used to impose tariffs. Trump applied the 50% rate in late August to approximately $20 billion of Canadian goods, or about 5% of Canada’s exports to the U.S., after last-minute negotiations failed.

The choice of statute followed a string of legal setbacks. On Feb. 20, the Supreme Court ruled 6-3 that the International Emergency Economic Powers Act doesn’t give the president power to impose tariffs. That decision struck down the earlier levies on Canada, Mexico, China and other trading partners. The White House then turned to a temporary 10% surcharge under Section 122 of the Trade Act of 1974, which was also struck down in court.

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Ottawa answered the latest Section 338 duties with dollar-for-dollar countermeasures, and Canada’s retaliatory tariffs went live on Sept. 8. Trump responded by banning imports of certain Canadian products. He also threatened to double tariffs on Canadian vehicles in January if the two sides can’t reach an agreement.

A swap rather than a cut

The coming exemptions would be the second revision to the 50% tariffs after the administration last month removed road salt and cement from the list. It offset that relief by adding other Canadian products, which kept the total value covered at about $20 billion. Canada, for its part, dropped seafood from its own retaliatory list.

It remains unclear which goods, if any, will be newly tariffed this time. If the administration repeats its September approach, total exposure for U.S. importers of Canadian goods may not shrink much, even though specific sectors get relief.

The tariffs also face a court test. A New Jersey-based food importer filed a challenge this week arguing that the administration has exceeded its legal authority.

Read more: Tariffs added 2.9 percentage points to goods inflation, New York Fed finds

Trade talks stalled as clients watch policy risk

There have been no substantive U.S.-Canada trade discussions since the August breakdown. Trump said Friday that Canada is working on a trade deal with the U.S., though the two countries have been in a standoff for two months.

Trade remains a live issue for investors heading into the critical Nov. 3 midterm elections. A UBS survey of millionaire investors suggested that wealthy investors are seeking advisor guidance as the midterms approach, as 71% of poll respondents ranked trade policies and tariffs as highly important.

Collins, who is seeking a sixth term, said she would keep pressing for broader relief.

“I will continue working directly with Administration officials to seek additional relief from tariffs and encourage a broader trade agreement with Canada, our neighbor, ally, and largest trading partner,” she said.