Canada to drop some of its retaliatory tariffs on the US

August 22, 2025

Canada's Prime Minister Mark Carney announced that Canada will partially reduce its retaliatory tariffs on US goods, while maintaining levies on autos, steel, and aluminum. This decision follows a phone conversation with President Trump after the two countries missed a trade agreement deadline. Starting September 1, Canada will end tariffs on goods compliant with the US-Mexico-Canada free trade agreement (USMCA), which Carney claims will restore free trade for most cross-border commerce.

Who is affected

Canadian workers and businesses in various sectors
Canadian steel, aluminum, and auto manufacturing industries
Ontario manufacturing sector, which has lost 38,000 jobs in the last three months
Canadian companies experiencing cutbacks and contract cancellations
US exporters to Canada who will benefit from reduced tariffs
Consumers in both countries affected by tariff-related price changes

What action is being taken

Canada is dropping retaliatory tariffs on US goods compliant with the USMCA while maintaining levies on autos, steel, and aluminum
The tariff reduction will take effect on September 1
Trump and Carney are planning another phone conversation soon
The US is maintaining its tariffs on Canadian goods, currently valued at 35% on non-USMCA compliant items
Canada is focusing on accelerating negotiations on key sectors including autos, steel, aluminum, and lumber

Why it matters

The partial tariff reduction will "re-establish free trade for the vast majority" of goods between the US and Canada
Canada's actual tariff rate from the US is approximately 5.6%, much lower than the average 16% for other countries due to the USMCA carve-out
Economists warn that US tariffs on steel and aluminum are "hugely disruptive" to Canada as a major supplier of these metals
The auto manufacturing sector is particularly vulnerable due to the integrated nature of North American auto production
The decision comes amid tensions in US-Canada relations, with the US ambassador citing concerns about rhetoric from Canadian politicians
The majority of Canadians support retaliatory tariffs against the US according to polling

What's next

Canada will focus on accelerating negotiations on autos, steel, aluminum, lumber, and other significant sectors ahead of a scheduled review of the USMCA free trade agreement next year
Trump and Carney will speak again over the phone soon

Read full article from source: BBC