Trump Offers Canada Reprieve from Tariffs, Dangles Keystone XL Pipeline

US President Donald Trump has temporarily spared Canada from 50% tariffs by offering a three-day reprieve. However, negotiations are still ongoing as Washington and Ottawa remain at odds over Canadian auto exports. The two countries have until Friday to settle their remaining disputes.

Trump introduced energy into the mix on Tuesday, suggesting that the Keystone XL oil pipeline could be revived if an agreement is reached. The 830,000-bpd pipeline would give Alberta another 830,000 barrels per day of capacity into the US. Trump declared that the two countries 'have a DEAL,' subject to finalization of documents.

However, Canadian Prime Minister Mark Carney stopped short of confirming this, stating only that 'substantial progress' had been made and that 'important work' remained. The main sticking point is over cars, with Washington offering to cut its 25% tariff on Canadian-made vehicles to 15%, potentially falling as low as 7.5% for vehicles with enough US content.

Ottawa wants Canadian and Mexican parts counted alongside US components when the tariff is calculated. This could determine whether Canada's languishing auto industry can remain competitive in its largest export market.