Canada has opened the door to increasing its tariffs on U.S. steel and aluminum next month if trade talks with the Trump administration stall.

The government “will adjust its existing counter-tariffs on steel and aluminium products on July 21, to levels consistent with progress that has been made in the broader trading arrangement with the United States,” according to a statement Thursday.

The U.S. has 50% tariffs on foreign steel and aluminum, and Canada currently has 25% counter-tariffs on U.S.-manufactured steel and aluminum products. But the two countries are currently negotiating on a trade deal, with a provisional deadline for the middle of July.

“We’ll continue these negotiations, of course, in good faith,” Prime Minister Mark Carney said at a news conference. “In parallel, we must reinforce our strength at home and safeguard Canadian workers and businesses from the unjust U.S. tariffs that exist at present.”

The Canadian government will also introduce new rules for federal projects, restricting them to using steel and aluminum produced in Canada or by “reliable trading partners” that provide reciprocal access through trade agreeemetns, according to the statement.

Canadian steelmaker Algoma Steel Group Inc. rose as much as 7.9% to C$9.85 in Toronto on news of the announcement, the highest intraday level since March 5, before paring those gains.

Canada is establishing new tariff-rate quotas to limit imports of steel from countries with which it doesn’t have a trade agreement — and it plans new tariff measures within weeks to address the risk of steel and aluminum dumping. Carney and his officials are worried that the Trump administration’s 50% tariffs on metals imports will cause global manufacturers to divert shipments to Canada.

The new quotas were not a request of the U.S. during the trade talks, but are “a consequence of the U.S. actions,” Carney told reporters.

The prime minister also highlighted a C$10 billion federal loan facility that provides liquidity to large businesses struggling to access traditional market financing.

He made the announcement alongside cabinet ministers Dominic LeBlanc and Melanie Joly. Carney said he is speaking with President Donald Trump “relatively frequently,” and LeBlanc added he’s having ongoing conversations with Commerce Secretary Howard Lutnick and will speak with Trade Representative Jamieson Greer on Friday.

Asked whether Canada would be willing to accept some U.S. tariffs as part of a deal, Carney responded that true free trade is in the best interests of both countries.

“It’s a negotiation,” he said. “If it’s in Canada’s interest, we’ll sign it. If it’s not, we won’t.”

—With assistance from Melissa Shin and Doug Alexander.

(Adds quotes, details from news conference starting in the fourth paragraph.)

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