Canada announced Friday it would drop most of its 25% retaliatory tariffs on U.S. goods, except autos, steel, and aluminum. The move precedes the review of the U.S.-Mexico-Canada Agreement later this year.
Canada Eases Retaliatory Tariffs
Canadian Prime Minister Mark Carney said that starting September 1, Canada will remove tariffs on goods qualified for the North American trade agreement. The action restores free trade on the majority of goods between the two nations.
Carney clarified that Canada enjoys the global lowest average U.S. tariff rate of 5.6% among its trading partners. He added that to keep such a stance when Canada was preparing to negotiate outstanding issues, there must have been some counter-tariffs pruned off.
U.S. Response to Canada’s Action
A White House spokesperson welcomed the news as “long overdue.” The White House spokesperson further stated that Washington will resume discussions on trade and national security with Canada in the coming months.
This followed a Thursday phone call between Carney and President Donald Trump. The two leaders described the call as fruitful, promising to meet again and have future talks in priority areas still at risk of tariffs.
Continuing Commitments on Strategic Sectors
While reducing tariffs, Canada will still maintain tariffs on U.S. automobiles, steel, and aluminum. Ottawa still puts a premium on those sectors in trade talks with Washington. Carney reaffirmed his government’s focus on securing good terms for Canadian industries and workers in the sectors.
U.S. tariffs on Canadian goods, raised to 35% in July, still cover items outside the scope of the free trade accord. Washington cited fentanyl smuggling and Canadian counter-tariffs as reasons for the increase.
History of the Trade Dispute
Canada had initially imposed retaliatory tariffs of CA$30 billion, or US$21.7 billion, on American tariffs on steel and aluminum. Products hit were orange juice, washing machines, and consumer goods of all kinds.
This was merely the beginning. Subsequent rounds of counter-tariffs were increased by Ottawa since the trade war began, including on $60 billion worth of U.S. products as well as cars.
Political and Public Reaction
Carney campaigned earlier in the year on a hard-nosed bargaining strategy with the United States. He employed the rhetoric of an “elbows up” business style, an ice hockey metaphor. He has since soft-pedalled that with an effort to maintain cooperation with Washington.
Polls of public opinion indicate Canadians overwhelmingly support retaliatory tariffs against the U.S. But the government has shifted toward easing tensions as part of general trade negotiations.
Broader Trade Strategy
Alongside tariff realignments, Carney’s government is laying new plans to reinforce Canada’s economy. They are diversifying export markets to other nations, speeding up home-construction projects, and increasing investments in national defense.
Earlier this year, there was also legislation to speed up approval for big infrastructure projects en masse. The first of the “nation-building projects” would be announced shortly, Carney said, in transportation, energy, and strategic minerals.
Industry Perspective on Canada-U.S. Trade Relations
Trade experts point out that Canada’s move to drop most retaliatory tariffs on U.S. goods demonstrates the necessity of protecting cross-border trade flows. Analysts stress that while many duties are being lifted, negotiations on strategic sectors such as autos, steel, and aluminum remain critical to ensuring economic balance.
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Final Thoughts
Canada’s decision to drop almost all its retaliatory US tariffs is a sign of the shift towards renewed friendship with the United States. While steel, aluminum, and automobile tariffs still stand, the two countries have committed to accelerating talks before the next review of the U.S.-Mexico-Canada Agreement.
