A Trade Deal Can Collapse at the Last Minute

22 August 2026

Executive Summary

The United States imposed new 50% tariffs on approximately $20 billion of Canadian goods today after negotiations between two of the world’s closest trading partners broke down almost at the finishing line.

Only hours earlier, the two sides had appeared close to an agreement that could have reduced tariffs affecting steel, aluminium and vehicles.

Instead, Canada suspended negotiations and Prime Minister Mark Carney announced dollar-for-dollar retaliationagainst the new US duties. No further negotiations are currently scheduled. 

The immediate tariffs affect only a relatively small portion of overall US-Canadian trade.

The more interesting corporate lesson is:

A business should not price, contract or invest on the assumption that a political agreement will happen simply because negotiations appear nearly complete.

UK Impact

British businesses increasingly operate in an environment where tariffs and trade rules can change during the lifetime of a contract.

UK exposure may arise through:

• US or Canadian customers.
• North American manufacturing.
• Automotive supply chains.
• Steel and aluminium.
• Timber and building products.
• Consumer goods.
• International distributors.
• Components crossing borders several times before final assembly.

The difficulty is particularly acute where a supplier quotes a fixed price while the tariff position remains unresolved.

Someone ultimately absorbs the additional cost.

If the contract does not say who, the answer may be determined through a commercial dispute.

Global Impact

Canada and the United States have one of the world’s deepest integrated supply chains.

Components can cross the border several times before a finished product reaches the customer.

Reuters reports that the new tariffs cover just over 5% of Canadian exports to the US, but they sit alongside existing measures affecting strategically important sectors including steel, lumber and vehicles. 

The wider uncertainty may matter more than the initial tariff value.

Businesses considering:

• New factories.
• Supplier contracts.
• Long-term pricing.
• Cross-border distribution.
• Capital expenditure.

now have to consider the possibility that the trading framework itself may continue changing.

Our View

Businesses exposed to politically sensitive trade corridors should incorporate tariff-change scenarios directly into contracts and pricing.

Companies should ask:

• Who pays if tariffs increase after the contract is signed?
• Is the price fixed regardless of customs costs?
• Is there a tariff-adjustment clause?
• Can either party terminate if duties exceed a defined threshold?
• Where is legal ownership transferred?
• Who is importer of record?
• Can production be redirected through another facility?
• Is an alternative supplier already qualified?
• Could retaliatory tariffs affect our exports in the opposite direction?
• Are investment decisions dependent upon a trade agreement that has not actually been signed?

There is an important difference between:

“Negotiators expect an agreement.”

and:

“An agreement is legally in force.”

Today’s US-Canada breakdown shows how quickly the distance between those two positions can become expensive.

Risk Indicator: ELEVATED

Disclaimer

The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.

Invictus Risk Solutions LLP – Helping organisations stay ahead of emerging risks through informed insight and independent analysis.