Prime Minister Mark Carney confirmed on Friday that Canada will scale back billions of dollars in retaliatory tariffs imposed on U.S. goods. The decision, he said, was aimed at “re-establishing free trade for the vast majority” of products that move between the two countries.
The change comes a day after Carney and President Donald Trump spoke for the first time since a missed deadline to secure a trade deal. Effective September 1, Canada will end tariffs on all goods compliant with the U.S.–Mexico–Canada Agreement (USMCA).
What Tariffs Stay in Place?
Despite the easing, Canada will maintain its 25% levies on U.S. autos, steel, and aluminium, sectors considered critical to national interests. Carney emphasized that the focus would now shift to negotiating over these “sensitive industries” ahead of the scheduled USMCA review next year.
Economists warn that U.S. tariffs on metals, currently 50% on steel and 25% on aluminium, have already caused major disruptions in Canada, with contract cancellations and job losses in the manufacturing sector.
A Hard-Hitting Trade Standoff
Canada originally slapped tariffs on C$30 billion ($21.7 billion) worth of U.S. products ranging from orange juice to washing machines. This was retaliation against Trump’s sweeping tariff strategy, which applied 35% duties on Canadian exports not covered under the free trade carve-out.
Carney insisted that Canada still holds an advantage compared to other trading partners, noting its effective tariff rate on U.S. goods is just 5.6%—far lower than the global average of 16%.
Trump Administration Welcomes Move
The White House said it “welcomes Canada’s decision”, calling it “long overdue.” Trump later told reporters he would speak to Carney again soon, signaling that further negotiations are expected.
U.S. Ambassador to Canada Pete Hoekstra, however, had recently accused Ottawa of jeopardizing trade talks by keeping its retaliatory tariffs, warning that it risked pulling “the rug out from USMCA.”
Canadian Public and Political Reactions
Polling suggests most Canadians supported retaliatory tariffs against the U.S., reflecting widespread frustration with Trump’s trade policies. Carney himself had campaigned in April on an “elbows up” strategy, borrowing from ice hockey to emphasize toughness at the negotiating table.
When asked if Canada was softening its stance, Carney pushed back, stressing the importance of defending Canadian workers while preserving the unique free trade carve-out. “It’s important we do everything we can to preserve this advantage for Canadian workers and businesses,” he said.
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Jobs on the Line
The auto industry in Ontario has already been hit hard, with an estimated 38,000 jobs lost in just three months due to cross-border disruptions. Economists warn that without a breakthrough, the integrated North American supply chain, where cars and parts cross borders multiple times during production, will face further strain.
With both sides standing firm on metals and autos, the tariff truce may have prevented escalation, but the hardest battles are still ahead.
