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Canada will lift a significant portion of its retaliatory tariffs on U.S. goods next month, Prime Minister Mark Carney announced Friday, in a move aimed at easing trade tensions with Washington while preserving leverage over key industries.
The decision follows Carney’s first phone call with U.S. President Donald Trump since the two countries failed to meet a self-imposed deadline to update their trade agreement.
Billions in Tariffs Rolled Back
Canada had imposed 25% tariffs on about C$30 billion ($21.7bn) worth of U.S. exports—including consumer goods like orange juice and washing machines—in retaliation for Trump’s sweeping tariff hikes earlier this year.
Carney said Canada will now align with the U.S. by dropping levies on goods compliant with the U.S.-Mexico-Canada Agreement (USMCA), restoring “free trade for the vast majority” of cross-border commerce.
The change will take effect on 1 September, but Canada will maintain tariffs on steel, aluminium, autos, and lumber, sectors viewed as strategically vital.
U.S. Welcomes Move but Presses for More
The White House welcomed Canada’s tariff rollback as “long overdue.” Trump later told reporters that he expects to speak with Carney again “soon” to continue negotiations.
However, U.S. Ambassador to Canada Pete Hoekstra warned last week that Ottawa’s counter-tariffs were “jeopardising trade talks” and undermining the spirit of the USMCA.
Washington has also expressed frustration over what it calls “personal attacks” by Canadian politicians on U.S. negotiators, adding strain to the bilateral relationship.
Domestic Pushback and Political Risk
The rollback could be politically fraught for Carney, who campaigned earlier this year on an “elbows up” approach to Trump—a hockey term for aggressive negotiating.
Conservative leader Pierre Poilievre blasted the move as a retreat:
“It is yet another capitulation and climb down by Mark Carney. His elbows have mysteriously gone missing.”
With the Liberals holding only a minority in Parliament, Carney must navigate both domestic opposition and pressure from business leaders who want Ottawa to focus on securing stability under the USMCA.
Economic Stakes: Steel, Autos, and Jobs
Canada’s steel and aluminium industries remain under heavy strain, with U.S. tariffs as high as 50% on imports. Economists warn the duties are “hugely disruptive” for Canadian suppliers.
The auto sector is particularly vulnerable, given that vehicles and parts typically cross North American borders multiple times during assembly. Ontario—Canada’s auto hub—has already reported 38,000 job losses in three months, mostly in manufacturing.
Carney defended his strategy, saying Canada enjoys a lower effective tariff rate of 5.6%, compared with an average of 16% for other U.S. trade partners.
“Let’s be clear, we have the best deal of anyone in the world right now. Nobody has a deal with the United States that they used to have.”
A Balancing Act
Carney’s recalibration reflects both economic realities and political calculation: protect strategic sectors while avoiding escalation that could jeopardize broader trade ties.
Whether this measured approach shields Canada from Trump’s hardball tactics—or exposes Carney to charges of weakness at home—will be tested in the coming months.
