Experts see limits to US-Canada trade deal

United States President Donald Trump's pledge to resolve the trade dispute with Canada "pretty soon" has raised hopes of a breakthrough, but experts say any agreement is likely to be limited and unlikely to end uncertainty over US tariff policy.

Ronald Stagg, a history professor at Toronto Metropolitan University, urged caution over Trump's latest remarks, saying the president has repeatedly promised to resolve international disputes without necessarily delivering an agreement.

"It would not be unusual for Trump to change his mind about a deal at the last minute, or to impose new conditions late in the process which would cause Canada to reject the deal," he said.

At a political rally in Port Huron, Michigan, on Sunday, Trump said the trade dispute would be settled "pretty soon", adding that Canada was "willing to give us anything at this moment".

Mesbah Fathy Sharaf, an economics professor at the University of Alberta, said both countries had strong economic reasons to reach an agreement, even as political disagreements continued to stand in the way.

"Tariffs are raising production costs, disrupting supply chains and weakening the competitiveness of businesses on both sides of the border," Sharaf said.

"The US also depends heavily on Canadian inputs, so these tariffs hurt American manufacturers as well," he said.

Last week, Trump also signed an order removing additional 50 percent tariffs on some Canadian agricultural and forestry products, including certain paper products, machinery and refrigeration equipment, while adding other products to the tariff list. The changes are scheduled to take effect this Friday.

Sharaf said the changes would offer some Canadian exporters relief but were unlikely to have a substantial impact on the Canadian economy as a whole.

"Removing tariffs on some products while imposing them on others mainly shifts the economic burden between industries," he said.

"More importantly, frequent changes create uncertainty, discourage investment and make it harder for businesses to plan production."

The dispute has intensified since formal trade talks broke down in August, prompting Washington to impose additional tariffs and Ottawa to respond with countermeasures.

Sharaf said he expects any agreement to focus initially on steel and automobiles rather than a broad tariff reduction.

"These industries are deeply integrated across the two economies, and tariffs increase production costs and weaken their competitiveness," he said. "Reducing tariffs would benefit manufacturers and consumers in both countries."

However, he added that the Trump administration was unlikely to abandon tariffs as a negotiating instrument.

"I expect selective reductions rather than a complete removal of trade barriers," Sharaf said.

Stagg also questioned whether a limited agreement would resolve the underlying trade tensions.

"Since we know nothing about the negotiations, it is difficult to know what is being discussed, but my suspicion is that it is not a comprehensive agreement under discussion, but rather it is one concerning only some of the trade irritants," he said.

The approaching US midterm elections could provide an incentive for the Trump administration to ease some of the pressure on Canadian trade, particularly as tariffs affect US businesses and consumers.

"It is fairly certain that the upcoming elections are behind the move to get a deal with Canada," he said, adding that tariffs against Canada were hurting enough US people that even some Republicans were speaking out against them.

Nevertheless, both experts noted that a possible agreement would not guarantee lasting economic stability.

Continued uncertainty

Sharaf said that even if a deal were reached, continued uncertainty over US tariff policy could discourage investment.

Without a clear timeline governing an agreement, Washington could seek to change its terms later, he added.

"What businesses need most is a lasting reduction in trade barriers, not temporary exemptions," he said.

Meanwhile, European Commission President Ursula von der Leyen landed in Montreal, Canada, on Wednesday to attend a summit that opens on Thursday. She said Canada and the European Union will craft "a new chapter" in their alliance.

After raising the prospect of Canada becoming the 27-nation bloc's first "associate member" last month, von der Leyen used the term after landing in Montreal on Wednesday.

"Our ambition is to build the closest partnership we have ever had with a non-European country," she said. "A new chapter in our shared history starts in Montreal."

Canadian Prime Minister Mark Carney said ahead of the summit that Canada and the EU "are building on each other's strengths" in a world that is "more dangerous and divided".

AFP contributed to this story.