Trump threatened to escalate tariffs beyond 35% if Canada opts to retaliate with tariffs on U.S. goods. Canadian goods are also subject to sector-specific tariffs, such as 50% levies on steel and aluminum as well as 25% tariffs on non-USMCA compliant autos and auto parts.

Despite the apparently positive atmosphere in talks, and the unusually warm relationship between Mr. Trump and Prime Minister Mark Carney of Canada, the country has still been on a wild ride.

President Trump threatened on Thursday to impose a 35 percent tariff on Canadian imports, upending negotiations between the countries that had Canada’s representatives hopeful that a trade deal could...