The new US tariffs would cover about $20bn worth of imports and could lead to job losses and business closures.

Canadian Prime Minister Mark Carney has spoken with United States President Donald Trump, Carney’s office said, as Canada tries to hash out a last-minute deal to avert new 50 percent tariffs from taking effect at midnight on Wednesday.

The two leaders spoke by phone about the ongoing trade negotiations on Monday afternoon, Carney’s office said on Tuesday without sharing any further details.

″We are negotiating,” Carney told reporters on Monday. “The negotiations are very intense and delicate. This is not the time to talk about negotiations in public.”

The new US tariffs would cover about $20bn worth of imports and apply regardless of whether Canadian goods qualify for preferential treatment under the US-Mexico-Canada trade agreement, which has shielded much of Canadian industry from earlier US tariffs.

Spokespersons for the White House and the Office of the US Trade Representative did not immediately respond to requests for comment.

The two countries have wrangled for decades over trade, poking each other over sore spots like Canadian softwood lumber imports and US access to Canada’s protected dairy market. Even so, they managed to remain friendly.

That has changed in the second term of Trump’s presidency as he has used tariffs as a major tool of his economic agenda, including to bring back manufacturing to the US.

Among the sticking points are existing US auto tariffs, the Reuters news agency reported, citing two unnamed sources.

The two sides have discussed cutting US Section 232 tariffs on Canadian vehicles to 15 percent from 25 percent, with further reductions based on the amount of US content in each vehicle, the sources said.

But the two sides also remained apart on how to account for content, with Washington demanding that only US-produced content be counted while Canada wanting all North American content, including Canadian and Mexican parts, to be counted.

With automotive profit margins averaging only 6 percent, even a 15 percent tariff was too high, a Canadian auto official told Reuters, adding that with roughly half of the value of every Canadian-built vehicle originating in the US, tariffs would hurt businesses on both sides.

Earlier on Tuesday, the US Commerce Department released new rules for automakers exporting from Canada and Mexico to certify their current levels of US content for tariff deductions, reducing the complicated exercise to once per year from twice per year. But the US Federal Register notice said automakers must recertify vehicles’ US content by September 30 for them to claim deductions in the new annual cycle starting December 1.

Billions of dollars at stake

Trade experts and industry officials say the new tariffs could lead to job losses and business closures in vulnerable sectors including lumber, wine and dairy. They also warn the dispute could complicate broader negotiations for the United States-Mexico-Canada Agreement (USMCA), which the US last month refused to renew and which is now in an annual review.

“There are billions in goods per year that were not impacted before, but now are at risk of being impacted significantly,” said Candace Laing, CEO of the Canadian Chamber of Commerce.

“Businesses have been doing a high-wire act for well over a year, holding off on hiring, investment and growing in Canada,” she said.

On Monday, Canadian officials met for nearly two hours with US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick.

Greer has repeatedly cited Canada’s tariffs that followed initial US tariffs, some provinces’ refusal to stock US liquor, and Canada’s dairy supply management system among US grievances.