In a significant development for North American trade relations, Canadian Prime Minister Mark Carney announced on August 22nd (Friday) that Canada is dropping retaliatory tariffs on a wide range of US goods. The decision, which comes just a day after a call with US President Donald Trump, is a direct response to a recent US move to exempt Canadian products covered under the United States-Mexico-Canada Agreement (USMCA) from a new round of punishing duties. The move marks a de-escalation in trade tensions and a step towards normalising the economic partnership between the two neighbours.
The Prime Minister stated that, as of September 1st, Canada would be “eliminating all Canadian tariffs on American goods” covered under the USMCA. He highlighted that while the trade deal is different from its predecessor, it still ensures that Canada maintains a more favourable trade position with the US than any other country. The retaliatory tariffs were initially imposed by Canada in response to previous US duties on Canadian steel and aluminium, as well as automotive products. While the new announcement signals a broad rollback of tariffs, Carney noted that Canada will “retain our tariffs on steel, aluminium and autos” as the two nations work to resolve these specific, long-standing issues.
The trade relationship between Canada and the US has been a source of volatility in recent years, particularly with President Trump’s focus on renegotiating what he calls “unfair” trade deals. The USMCA, which replaced the North American Free Trade Agreement (NAFTA), is a central pillar of this relationship. With the USMCA due for review in 2026, the Canadian government’s decision to drop the retaliatory tariffs is seen as a strategic move to stabilise the trading environment and demonstrate goodwill ahead of future negotiations.
The announcement was met with a mix of relief and caution. Businesses in both countries that had been impacted by the tariffs are expected to benefit from the reduced costs and increased certainty. However, some trade experts have voiced concern that while the immediate crisis has been averted, the underlying issues remain unresolved. They point to President Trump’s continued push for a more protectionist trade policy and his public statements about potentially renegotiating the USMCA as a sign that future trade disputes are not out of the question. The move, however, is a positive sign for the millions of jobs and billions of dollars in trade that depend on a stable and predictable North American market.
