OTTAWA--Canada said it would remove its 25% tariff on about half of the U.S. goods it has targeted since March as it attempts to reset its trading relationship with the U.S.
However, Prime Minister Mark Carney said 25% duties on U.S. steel, aluminum and automobiles would remain in place. Overall, the decision affects about $21 billion of U.S. exports to Canada, on goods such as orange juice, peanut butter, wine, spirits, beer, appliances and motorcycles. Tariffs on those goods come off as of Sept. 1.
The move comes the day after Carney and President Trump spoke for the first time since the two countries failed to reach a trade deal prior to an Aug. 1 deadline. At a press conference Friday, Carney said by dropping the tariffs, the U.S. and Canada will now treat the bulk of their trade equally. The U.S. exempts Canadian imports from a 25% tariff so long as they comply with the terms in the U.S.-Mexico-Canada free trade treaty, known as USMCA. Canada will do the same with U.S. imports.
Carney said he had a lengthy conversation with Trump, who assured him that dropping the bulk of the tariffs would help bilateral trade talks.
"Canada currently has the best trade deal with the United States. While it is different from what we had before, it is still better than that of any country," Carney said, adding the U.S. average tariff on Canadian imports sits at about 5.6%. "Nobody has a deal with the United States that they used to have."
A White House official said the administration welcomed Canada's decision, "which is long overdue." At a White House event, Trump said he would speak to Carney again in the near future. "We want to be very good to Canada. I like Carney a lot, I think he's a good person," the President said.
Canada is the U.S.'s third-largest two-way trading partner, after the European Union and Mexico. Elevated trade uncertainty has weighed on Canadian business activity, with companies delaying or scrapping investment and hiring plans.
Carney said Canada will now focus on helping industries that face hefty sectoral tariff--like steel, aluminum, automobiles and lumber--and prepare for the formal review by U.S. authorities of USMCA, which is presently scheduled to begin next year.
Canada is the lone Group of Seven economy that has failed to reach a tariff deal with the U.S. before Trump's deadline. Carney won an election in April, arguing his experience--as a former banker at Goldman Sachs and a central banker in two countries--made him the best person to navigate the economy through the Trump administration.
Last week, the U.S. Ambassador to Canada, Pete Hoekstra, said the Canadian government's retaliatory tariffs against the U.S. and decisions to either ban or reconsider the purchase of U.S. goods threaten the future of the existing USMCA trade treaty.
"Canada is calling into question the future of" USMCA, Pete Hoekstra said.
Carney's decision drew immediate praise from former senior Canadian officials.
"Canada retaliating alone wasn't working," said Brian Clow, a senior adviser on U.S.-Canada relations to former Prime Minister Justin Trudeau. "For retaliation to work, the world needed to stand together and stand up to Trump. That didn't happen so here we are."
Mark Warner, a Canadian and U.S. trade lawyer with MAAW Law, said Carney has "read the writing on the wall" after allies like the European Union, Japan and South Korea cut deals with the Trump administration.
"With Trump, retaliation is a nonstarter," Warner said, adding that keeping retaliatory duties in place puts Canada's exemption under USMCA at risk. Warner noted Mexico, the other USMCA partner, has not imposed retaliatory tariffs and won a 90-day extension at the Aug. 1 deadline.