A concrete resolution remained just out of reach as marathon talks between trade officials from the United States and Canada continued on Friday afternoon, with mere hours to spare before the 50 percent tariffs threatened by President Donald Trump will go into effect.

U.S. Trade Representative Ambassador Jamieson Greer and Canadian trade minister for U.S. relations Dominic LeBlanc, among others, raced against the clock following a three-day deferral by the Commander in Chief that was designed to provide more space for negotiations.

While both sides have indicated that an interim agreement is forthcoming, with the president even Truthing Wednesday that a deal had been reached, it hasn’t been finalized. If the two sides can’t come to a consensus, the trade action, imposed under Section 338 of the Tariff Act of 1830, will take effect at 12:01 a.m., blanketing 550 product categories in steep import taxes.

Nicole Bivens Collinson, International Trade and Government Relations Practice leader at Sandler, Travis & Rosenberg, P.A., said the dairy and alcohol issues are likely to be resolved most easily, while the tariffs on autos are likely the “sticky wicket” that have impeded progress in the negotiations.

She also believes the sectoral duties, imposed by the U.S. under Section 232 of the Trade Expansion Act of 1962 in March of last year, are likely a point of contention within the closed-door discussions. “Canada imposed [25 percent duties] in response to the U.S. imposition of Section 232 tariffs on steel and aluminum, therefore, Canada reasons the resolution discussions must include Section 232 tariffs. The U.S. argued that it should not.”

Collinson said she had heard rumblings that a solution could materialized around a tariff rate quota (TRQ) on steel and aluminum imports from Canada. “Those goods may be subject to either duty free or a 10-15 percent tariff only,” she said, while imports above the TRQ limit would be subject to the full Section 232 tariff rates. “That is likely acceptable to the Canadians and could help pave the way for more meaningful USMCA discussions.”

“If I were to give a chance of resolution tonight before the deadline for Section 338 tariffs… I would say the likelihood of tariffs is about 40 percent,” she said.

“We’re encouraged that Canada and the U.S. are continuing to talk, and we see that as a positive sign for the future of our trade relationship. Hopefully these discussions will lead to a lower tariff rate, if not eliminate the tariffs altogether,” Beth Hughes, vice president of trade and customs policy at the American Apparel and Footwear Association, told Sourcing Journal.

“As we wait to hear the outcome, we encourage both governments to keep the conversation going if more time is needed to find a solution that strengthens North American trade and avoids adding new tariff costs for businesses and consumers.”

Calling the threat of tariffs “a significant detriment to Canadian brands,” with the U.S. being a key market for exports, Rathna Sharad, founder and CEO of cross-border shipping and trade compliance platform FlavorCloud, said, “there’s a whole bunch of harmonized commodity codes that are impacted by it, including apparel and consumer goods, and it’s going to make these goods incredibly expensive for the U.S. buyer, the consumer.”

“It is not a surgical, or just a few specific categories—it actually has widespread impacts,” she added, referring to the proposed tariff policy. “There’s apparel, there’s textiles, there’s jewelry, there’s perfumes, there’s candles, there’s office supplies, there’s all kinds of luggage and furniture. So it has widespread implications.”

Sharad said the situation has been unusual for several reasons, including the fact that the tariffs threaten goods that are explicitly covered by the U.S.-Mexico-Canada Agreement (USMCA). “Free trade agreements are incredibly important because they allow for relief in very specific categories, and it’s meant to increase partnership and trade between the countries. So you don’t usually see tariffs that that go around them,” she explained.

Should the tariffs be imposed at midnight, she believes the fraught negotiations surrounding the North American trilateral trade pact will be imperiled further. “That will sour the relationship and therefore be a bigger hindrance to whatever they decide to do with USMCA or different, new version of USMCA.”

Asked whether FlavorCloud’s clients, which include companies like Gap Inc., Elwood, Alexis Bittar and others in the apparel, wellness and beauty spaces were rethinking North American cross-border sourcing amid the ongoing tensions between the U.S. and Canada, Sharad said she hadn’t noticed recent shifts in sourcing, perhaps because the situation remains so flued.

“I think last year the implications were felt because we had tariffs go up and down multiple times, and that certainly impacted trade between Canada and the U.S. and strained it,” she explained. “This year has been somewhat stable, but I think everybody is kind of in a wait-and-see mode to really understand what comes out of it.”

One universal truth Sharad has noted over the past year is that “when tariffs increase, people stop buying.” Price hikes are unilaterally disruptive to businesses, and they begin to pull back on their purchases as they look for strategies to address risk.

“What are different mitigations that they can do in terms of product pricing, to offset that decline?” is a question a company might ask. Additionally, in-region localization of sales has become a priority, “which basically means they’re looking at, instead of doing cross-border direct-to-consumer, how do we do wholesale in-country and then localized fulfillment?”

“And finally, not just relying on a single source, but multiple different sources, has been one of the strategies that we’ve seen,” she added. There’s no single sourcing standout anymore, “because they’ve all been through the high tariffs and then a reset,” Sharad said, “so I think it is more about being agile, so that you’re able to adapt short term. It’s a much more nimble, agile sourcing cycle, and it’s also a multi-pronged sourcing strategy.”