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Canadian negotiators are trying to secure a deal with the U.S. before 50 per cent tariffs on a wide range of goods threatened by President Donald Trump kick in on Aug. 19, while warning of an ugly new phase of the trade dispute if the levies are imposed.

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After months with little progress, a flurry of high-level meetings has given some Canadian officials optimism for reaching an interim agreement to ease trade across the U.S.-Canada border. That would effectively be a side deal before more substantial and permanent talks on the future of the North American trade relationship.

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But Canadian officials have told their U.S. counterparts that if Trump carries out his 50 per cent tariff threat this month, it would severely damage relations. Prime Minister Mark Carney would face strong domestic pressure to retaliate and that may set off a new cycle of escalation, according to people who have been briefed on the talks.

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The U.S. promised 50 per cent tariffs against nearly $29 billion of goods such as beer, plywood, milk, and hockey sticks from its northern neighbour unless Carney acts to end Canada’s countertariffs on U.S.-made autos, trade controls on dairy, and most provinces’ decision to take U.S. alcohol off their shelves.

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The new duties would see the White House use an unprecedented power, Section 338 of the Depression-era Tariff Act, and would not include exemptions for goods traded under the Canada-United States-Mexico Agreement that Trump signed in his first term.

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Carney’s government aims to use the coming days to finally get to an agreement to lower the Section 232 tariffs Trump has put on foreign-made steel, aluminum, autos and lumber, according to the people with knowledge of the discussions, who spoke on condition of anonymity due to the sensitive negotiations.

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Canadian officials, led by chief negotiator Janice Charette and Canada-U.S. Trade Minister Dominic LeBlanc, have told U.S. Trade Representative Jamieson Greer and his team they can address the main U.S. irritants if there is meaningful relief on the 232 tariffs, said the people familiar with the talks.

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But Charette and LeBlanc also warned their U.S. counterparts that Carney will be politically boxed in if Trump goes ahead with the 50 per cent tariffs, and unable to control the reactions from provincial leaders and the Canadian public. Many Canadians have spurned U.S. goods and travel after Trump won the 2024 election, imposed tariffs and began talking about making Canada a 51st U.S. state.

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Imposing more U.S. tariffs may torpedo Canada’s ability to make future concessions to reach a deal, the people said.

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It is unclear whether Trump is willing to offer significant enough tariff relief to satisfy the leaders of Canadian provinces, who have control over the liquor bans along with other measures such as anti-U.S. procurement rules. That includes Ontario Premier Doug Ford, Quebec Premier Christine Frechette, and British Columbia Premier David Eby.