• Canada will drop retaliatory tariffs on U.S. goods covered by the USMCA, effective September 1.
• Prime Minister Mark Carney emphasizes a new trade approach following positive U.S. gestures.
• Key tariffs on U.S. steel, aluminum, and automotive products will remain for now.

On August 22, Prime Minister Mark Carney announced that Canada plans to eliminate many retaliatory tariffs on U.S. goods in an effort to improve trade relations. This move aligns significantly with recent clarifications from the U.S. regarding imports compliant with the U.S.-Mexico-Canada Agreement (USMCA). Carney noted that in "this context", Canada will remove all tariffs on U.S. goods covered by the USMCA, marking a shift back towards free trade. While many tariffs are being lifted, those on U.S. autos, steel, and aluminum will remain in place for the time being, according to Reuters and Reuters.

The announcement follows a phone call between Carney and U.S. President Donald Trump, which Carney called "productive." The intention is to reset sluggish trade discussions between the two nations. "Canada and the U.S. have now re-established free trade for the vast majority of our goods," Carney stated during a press conference. Additionally, the Canadian dollar saw gains following this news, reflecting investor confidence in the trade thaw, as reported by BBC and CBS News.

Carney emphasized that this decision is a significant step in aligning trade practices with U.S. exemptions initially hinted at by Trump. He noted, "Canada currently has the best trade deal with the United States," indicating a belief that while the current deal may differ, it remains favorable compared to prior agreements. Both leaders shared a positive outlook regarding this refreshed approach, described as a necessary move toward negotiating a deeper trade and security relationship, according to India Times and NPR.

The Canadian Prime Minister assures that while significant changes are being implemented, tariffs that impact key sectors like automotive and metals will stay as negotiations continue. Carney's approach marks a deviation from his earlier promises to maintain a hard line against U.S. tariff policies during his April election campaign. Critics, including labor unions, have labeled the recent announcements as capitulation, warning that it opens the door for heightened pressures from the Trump administration. The sentiment was echoed as union leaders characterized the tariff reduction as inadequate without corresponding concessions from the U.S., as highlighted by Al Jazeera and SCMP.

As both countries prepare for a review of the USMCA scheduled for 2026, discussions are intensifying on various strategic sectors still affected by tariffs. With 75% of Canadian goods exported to the U.S., the potential economic ramifications underscore the importance of solidifying these trade relationships, according to Newsweek and The Jakarta Post.