Canada Eliminates Retaliatory Tariffs on US Goods: What This Means for North American Trade.

Canada Eliminates Retaliatory Tariffs on US Goods: What This Means for North American Trade

In a major policy move announced on Friday, Canadian Prime Minister Mark Carney revealed that Canada will eliminate all retaliatory tariffs on US goods, effective September 1, 2025. This decision closely follows recent high-level discussions between PM Carney and US President Donald Trump and aligns with Washington’s exemption of products covered under the United States-Mexico-Canada Agreement (USMCA). 

The Announcement: A Shift in Trade Dynamics

Prime Minister Carney’s declaration signals a new era for trade between Canada and the United States. Starting September 1, Canada will remove all Canadian tariffs on American goods covered under the USMCA, restoring tariff-free trade across a vast majority of goods exchanged between the two countries. Carney described the USMCA as a “unique advantage” for Canada, emphasizing that “Canada currently has the best trade deal with the United States” compared to any other nation.

While this move lifts tariffs on most goods, Canada will maintain existing tariffs on steel, aluminum, and automotive products as negotiations continue on these sensitive sectors. 

Why Is This Happening Now?

This development follows a period of escalating tariffs and trade tensions. Retaliatory tariffs were initially imposed by former Prime Minister Justin Trudeau in response to US duties on Canadian products. However, as the Trump administration decided to exempt USMCA-covered imports, Canada responded by dropping its own retaliatory measures.

Trade experts point out that more than 85% of Canada-US trade will remain tariff-free under these changes, and preserving the spirit of the USMCA is vital for both Canada and Mexico, given the large share of their exports headed to the US market. 

The Bigger Picture and Future Challenges

Despite this relief, challenges remain. The US recently increased tariffs on Canadian imports outside the USMCA, raising some duties from 25% to 35%, and signaled intentions to renegotiate aspects of the agreement. Sector-specific US levies continue to affect Canadian industries, especially in steel, aluminium, and autos. There’s also the looming prospect of a USMCA review scheduled for 2026 and hints at future US demands for renegotiation. 

What’s Next for Exporters and Traders?

• Most Canadian and Mexican goods will continue to receive preferential access under the USMCA.

• Canada’s tariffs on US goods (except certain sectors) will be eliminated, potentially lowering costs for businesses and consumers.

• Bilateral discussions are expected to address outstanding issues in the steel, aluminium, and auto sectors.

• There remains uncertainty regarding future US trade policy, particularly possible changes to the USMCA ahead of its scheduled review.

Conclusion

Canada’s decision to drop retaliatory tariffs marks a positive development in North American trade relations, strengthening the established framework of the USMCA and reinforcing the resilience of the Canada-US partnership. While some key sectors still face barriers, the outlook for a majority of bilateral goods trade appears brighter—at least for now.