Canada-U.S. trade negotiations are showing renewed momentum, with both sides increasingly focused on potential concessions and tariff changes, according to Canadian industry sources familiar with the discussions, iPolitics has learned.

The shift has raised hopes that the two countries could begin narrowing some of their differences, with Canadian and American officials expected to meet again early next week.

Industry sources said the change in tone has come as both sides acknowledge that reaching an agreement will require movement from each country. Discussions are now focusing on what concessions or changes could help resolve the dispute rather than which side is responsible for creating it.

One potential area of movement involves Canada’s supply management system.

While supply management has long been a source of friction between Canada and the United States, industry sources now say that American negotiators are not currently demanding that Canada dismantle the system.

Instead, the U.S. is seeking changes to the way Canada allocates tariff-rate quotas for American dairy products, essentially the process that sees who is allowed to import certain quantities of U.S. dairy products into Canada at lower tariff rates.

That distinction could provide negotiators with more room to reach a compromise.

Changing the allocation process would be significantly narrower than reopening Canada’s broader supply management system, which protects Canadian dairy, poultry and egg producers through production controls, regulated prices and restrictions on imports.

Canada’s supply management system, which covers dairy, poultry and eggs, controls domestic production, sets prices and limits foreign competition through tariff-rate quotas, or TRQs. Imports are permitted up to specified levels at low or zero tariffs, while products entering above those thresholds can face steep duties.

Canada agreed under CUSMA to give U.S. dairy producers tariff-free access to 3.9 per cent of the Canadian dairy market. But the way Ottawa distributes that access has become a constant source of friction between the two countries.

The U.S. has argued that American producers aren’t able to take full advantage of the access Canada promised. U.S. figures have shown that, on average, only 42 per cent of the 14 dairy TRQs created under CUSMA were being filled, with nine categories below 50 per cent.

On the other hand, Canadian importers have also raised concerns about the system, arguing that much of the quota has historically gone to major Canadian dairy processors rather than importers, distributors and retailers that would have a greater incentive to bring competing American products into the country.

Another possible area of movement is Canada’s restrictions on American alcohol.

A source familiar with the Quebec government’s position said there is some flexibility around the province’s ban on U.S. liquor, but that Quebec would need Prime Minister Mark Carney to provide direction before making a change.

The liquor restrictions have been among the most visible retaliatory measures adopted in Canada amid the trade dispute, with provinces using their control over alcohol distribution to pull or restrict U.S. products.

Any coordinated reversal could therefore become part of a broader effort to reduce trade tensions if Ottawa and Washington move closer to an agreement.

The federal government would not discuss the substance of the negotiations.

“As detailed trade discussions between our two countries are ongoing, we will not comment on specifics,” Gabriel Brunet, a spokesperson for federal Minister Dominic LeBlanc, said in a statement.

“Canada’s objective remains to reach a comprehensive deal that addresses sectoral tariffs and benefits Canadian workers, farmers and businesses.”