Canada To Drop Tariffs On US Goods Under USMCA

USMCA 2026 review – Prime Minister Mark Carney has announced that Canada will remove retaliatory tariffs on US goods protected under the United States-Mexico-Canada Agreement (USMCA), signaling a major shift in Canada-US trade relations.

Carney explained that Canada is aligning its tariff strategy with the United States by lifting retaliatory duties on products already exempted under the USMCA. He emphasized that this move preserves Canada’s preferential access to the US market at a time when global trade is becoming increasingly uncertain.

Mark Carney Removes Retaliatory Tariffs to Preserve Canada’s Trade Advantage

According to the Prime Minister, Canada’s decision ensures that both countries are once again enjoying tariff-free trade on the majority of goods. Carney highlighted that Canada is retaining tariffs only on steel, aluminum, and automobiles while negotiations continue on those specific industries.

“Canada currently has the best trade deal with the United States. And while it’s different from what we had before, it’s still better than that of any other country,” Carney said. “We have the lowest tariff rate on average, a little over 5.5 per cent versus the 16 per cent global average. It’s important that we preserve that advantage.”

Canada and US Rebuild Trade Cooperation Through USMCA

Carney’s announcement followed a phone conversation with US President Donald Trump on Thursday, August 21, 2025. According to a statement from the Prime Minister’s Office, the two leaders engaged in a “productive and wide-ranging conversation” about trade, security, and future economic opportunities.

Carney also convened his Cabinet in Ottawa today, Friday, August 22, before formally announcing the decision to Canadians. He noted that the move is designed to reset trade talks with Washington ahead of the 2026 USMCA review, which will determine the long-term direction of North American trade.

The Prime Minister stressed that Canada’s commitment to the USMCA ensures that more than 85% of Canada-US trade remains tariff-free, giving Canadian exporters stability and certainty in an unpredictable global market.

Why Mark Carney’s Tariff Decision Matters for Canada

More than 75% of Canada’s exports go to the United States, making access to the American market critical for Canadian jobs and growth. The Prime Minister argued that lifting retaliatory tariffs protects Canadian businesses from higher costs while avoiding inflationary pressures on consumers.

Carney also pushed back against claims that Canada is simply appeasing President Trump, insisting that his government is acting in Canada’s national interest.

“The President and I had a long conversation. There is a review of the free trade agreement in the spring. We’re starting our preparations,” he explained.

USMCA Tariffs and Canada’s Remaining Challenges

While most Canadian goods are shielded under the USMCA, some sector-specific tariffs remain in place. President Trump has maintained 232 tariffs on key Canadian exports, including a 50% tariff on steel and aluminum, which continues to impact Canada’s manufacturing and construction industries.

Former Prime Minister Justin Trudeau had originally imposed retaliatory tariffs in response, but Carney emphasized that these measures were largely unnecessary after Washington exempted USMCA-covered goods from duties.

Canada will now focus on negotiating a resolution for the steel, aluminum, and auto sectors, industries that employ hundreds of thousands of Canadians and remain highly sensitive to shifts in US trade policy.

Economists Support Removal of Retaliatory Tariffs

Carney’s move has drawn praise from economic experts who had previously warned that Trudeau’s retaliatory tariffs risked worsening inflation. Bank of Canada Governor Tiff Macklem has repeatedly cautioned that counter-tariffs make US imports more expensive for Canadian households and businesses.

In a June speech in Newfoundland, Macklem argued that the tariffs “put upward pressure on inflation at a time of economic fragility.”

By eliminating retaliatory tariffs on most US goods, Carney is aiming to stabilize prices while keeping the focus on sectors where Canada has strong leverage in negotiations.

Balancing Trade Strength With Negotiation Leverage

Despite criticism from those who advocate for an “elbows up” strategy against Washington, Carney remains firm that Canada’s best path forward is preserving preferential access under USMCA.

With the agreement set for review in 2026, Canadian officials are already preparing strategies to safeguard the deal against potential US renegotiations. US Commerce Secretary Howard Lutnick has suggested that President Trump intends to push for changes, raising uncertainty for both Canada and Mexico.

Nonetheless, Carney believes that showing goodwill now strengthens Canada’s position going into next year’s talks while maintaining an economy that is less vulnerable to inflationary shocks.

Canada’s Path Forward in North American Trade

The announcement marks a significant moment in Canada-US trade relations, underscoring Carney’s approach of balancing assertive negotiation with economic pragmatism. By dropping retaliatory tariffs, Canada signals that it wants to strengthen cooperation under USMCA while protecting its most vital industries.

As North America moves toward the 2026 review, preserving free trade between Canada, the United States, and Mexico will be critical not just for businesses, but for millions of workers who rely on cross-border commerce.

For now, Carney’s decision offers relief to Canadian importers, exporters, and households alike, a strategic step to keep Canada competitive while minimizing economic risks in an increasingly volatile global trade environment.

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