He suggested there is deep mistrust in Chrystia Freeland, the lead Canadian trade negotiator, and her team.
The price of oil, one of Canada's major exports, eased after US data showed a surprise build in domestic crude inventories.
US President Donald Trump confirmed Wednesday that he had refused to meet Canadian Prime Minister Justin Trudeau on the sidelines of the UN General Assembly, accusing Canada of treating the United States "very badly".
For the first time, Ambassador David MacNaughton identified such tariff protection as a critical Canadian demand in the continuing North American Free Trade Agreement talks, alongside the preservation of NAFTA's "Chapter 19" independent panel system for resolving trade disputes. "We don't have any comment beyond that".
However, he stopped short of categorically ruling out making a deal with Canada, saying that "there's a chance" of coming to an agreement on a deal which he said would be called "USMC", short for "U.S. -Mexico-Canada".
"They have treated our farmers in Wisconsin and NY state and a lot of other states very badly", he said. "We don't like their representative very much".
The Canadian dollar weakened to its lowest in more than a week against the greenback on Wednesday, as the Federal Reserve hiked interest rates and investors anxious that Canada would be left out of a trade deal with its NAFTA counterparts.
In a wide-ranging press conference in NY on Wednesday, Trump also said, "We are very unhappy with the negotiations and the negotiating style of Canada".
Devastating Tornado Knocks Out Power For More Than 145000 In Ottawa Area
Nicole Lowden describes how a tornado Friday destroyed her home in the rural Ottawa community of Dunrobin. However, she said the school would remain open all night for anyone who needed a place to stay.
Trump said Wednesday that he rejected a meeting with Trudeau "because his tariffs are too high and he doesn't seem to want to move and I told him, 'Forget about it'".
"We know that Canada's interests are what we have to stand up for and we will", Trudeau said, speaking at the Council of Foreign Relations in NY.
While the talks have been "challenging", the ball is on the USA side of the court, MacNaughton said at an event in Toronto hosted by the US website Politico.
"There are some parties working in Washington who think that if the two leaders get together, they may be able to resolve the thornier issues", said the person, familiar with White House deliberations.
The two sides are still far apart on major issues such as how to settle disputes and U.S. demands for more access to Canada's protected dairy market.
This will also mean that the United States can impose 25 percent tariffs on Canada's auto and dairy imports and exports.
"I don't think there's anything to read into it", Trudeau said.
"We're going to go ahead with Mexico", he added.