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Trade dispute centers on alcohol and tariffs
Canadian Prime Minister Mark Carney signaled Thursday that American liquor could reappear on provincial shelves if Washington addresses tariffs on metals and automobiles, amid escalating rhetoric in bilateral trade negotiations.
Retaliatory measures spark diplomatic friction
Canadian provinces removed U.S.-produced alcoholic beverages from store shelves in March 2025 in response to tariffs imposed by the Trump administration on steel, aluminum, vehicles, and agricultural products. Ontario, home to one of the world's largest liquor buyers, led the boycott.
U.S. officials have criticized the move. Commerce Secretary Howard Lutnick called the provincial bans "disrespectful" on Wednesday, while Trade Representative Jamieson Greer warned of repercussions if the dispute remains unresolved.
Negotiations hinge on USMCA review deadline
Carney framed the alcohol restrictions as a bargaining chip, stating progress on liquor sales could occur "very quickly" if broader tariff issues advance. He emphasized Canada's readiness for "detailed negotiations" on the future of North American trade but also indicated a willingness to delay if necessary.
The U.S. has cited multiple trade irritants, including alcohol and dairy market access, as Canada, the U.S., and Mexico face a 1 July deadline for a mandatory review of the USMCA trade agreement.
"There's two parties in a negotiation. We're not sitting here taking notes and taking instruction from the U.S."
Mark Carney, Canadian Prime Minister
Provincial autonomy complicates resolution
Liquor sales in Canada are regulated by provinces, not the federal government, leaving decisions on U.S. alcohol sales to local leaders. Ontario Premier Doug Ford has maintained that American beverages will not return to provincial shelves until sector-specific tariffs are lifted.
Ford argued that Canadian boycotts, including reduced travel to the U.S., are costing the American economy "tens of billions of dollars." He suggested a swift resolution could benefit both nations if tariffs are removed.
Economic and political pressures shape talks
Trump's tariffs have particularly impacted Ontario, a hub for Canada's auto industry, where thousands of jobs have been lost. Candace Laing, president and CEO of the Canadian Chamber of Commerce, stated Canada is open to using alcohol as "leverage" to secure tariff reductions but will not concede without reciprocal gains.
"Canada is not going to give any concessions that aren't in the context of a real negotiation."
Candace Laing, Canadian Chamber of Commerce
Fen Hampson, a Carleton University professor and co-chair of its Canada-U.S. relations expert group, noted that Carney's political position has strengthened recently, while Trump's domestic support has waned amid unpopular foreign policy decisions. Hampson suggested Canada may benefit from waiting to observe U.S. deals with Mexico and other trading partners.
Lutnick dismissed this strategy as "the worst I've ever heard," citing the U.S. economy's size advantage. Hampson countered that Canada holds leverage through its supply of metals, energy, and critical minerals.
"The Canadians are very smart here. They're ragging the puck, they're running the clock down."
Fen Hampson, Carleton University
