Canada to drop retaliatory tariffs on US goods

Canada’s Prime Minister, Mark Carney has announced that his government will lift some of its retaliatory tariffs on US goods, though key sectors such as autos, steel and aluminium will remain under heavy levies.

The move comes after Carney held his first phone conversation with US President Donald Trump on Thursday, following a missed deadline for both countries to reach a new trade agreement.

Canada had imposed a 25% duty on roughly C$30bn ($21.7bn; £16bn) worth of US goods, targeting products ranging from orange juice to washing machines.

The tariffs were introduced in response to Washington’s own measures, which placed a 35% levy on Canadian exports not compliant with the existing trade framework.

Carney said Ottawa would now align with Washington by scrapping tariffs on goods that fall under the US-Mexico-Canada free trade agreement (USMCA).

He argued the decision would “re-establish free trade for the vast majority” of cross-border products. The change takes effect on 1 September.

The White House welcomed the announcement, calling it “long overdue” in a statement to CBS. Trump later told reporters he expects to speak with Carney again soon to continue trade discussions.

Canada is one of only two nations, alongside China, to directly retaliate against Trump’s tariffs with its own set of levies. Polling suggests most Canadians support that hardline approach, viewing it as necessary to protect the country’s economic interests.

Carney, elected in April on a campaign promise to take an “elbows up” stance with Washington, defended the partial rollback, stressing that Canada still enjoys better tariff terms than many US trade partners. According to him, Ottawa’s effective rate on US goods averages 5.6%, compared with around 16% for other countries.

“As we work to address outstanding trade issues with the US, it’s important we preserve this unique advantage for Canadian workers and businesses,” Carney said.

Despite the easing, major points of contention remain. The US has imposed a 50% tariff on steel and aluminium imports—excluding those from the UK—and a 25% tariff on copper. Canada responded with its own 25% duties on American steel, aluminium and autos, which Carney confirmed will remain in place.

Economists warn that the metals dispute is hitting Canada hard, as the US is the largest buyer of Canadian steel and aluminium. Firms have already reported cancelled contracts and reduced output. The auto sector is also vulnerable, with Ontario, Canada’s manufacturing hub, reporting 38,000 job losses in three months, most of them in auto production.

The US ambassador to Canada, Pete Hoekstra, recently accused Ottawa of undermining trade talks by maintaining its countermeasures, saying it “pulled the rug out from USMCA.” He also criticised Canadian politicians for directing personal attacks at Trump and his negotiating team.

Carney, however, said the focus will now shift to accelerating talks on the most sensitive sectors, autos, steel, aluminium, lumber, before the scheduled USMCA review next year.

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