Canada Drops Most Retaliatory Tariffs on U.S. Goods Under CUSMA

Canada is phasing out many of its retaliatory tariffs on U.S. goods that fall under the Canada-U.S.-Mexico Agreement (CUSMA), a decision announced by Prime Minister Mark Carney on August 23 [1]. This move aligns Canada with U.S. tariff exemptions for goods covered under the trade pact, effectively removing tariffs on the majority of U.S. imports that were previously subject to Canadian countermeasures [6]. Carney emphasized that the decision reflects Canada’s favorable position in its trade relationship with the U.S., where over 85% of Canadian exports remain tariff-free [5].

The shift represents a strategic recalibration of Canada’s approach to U.S. trade tensions. Carney stated that the U.S. remains committed to the core of the trade agreement, and Canada is responding in kind by matching U.S. actions. This move comes after months of gradual rollbacks of retaliatory measures, which the government had found ineffective in supporting Canadian industries [2]. The government will now shift focus to supporting sectors most affected by U.S. tariffs, including steel, aluminum, automobiles, and lumber [9].

The announcement follows a direct engagement between Carney and U.S. President Donald Trump, who praised the conversation as productive and reaffirmed his commitment to maintaining strong U.S.-Canada relations [1]. Carney noted that the U.S. and Canada have reestablished free trade for the vast majority of goods, and he described the current trade deal as the “best deal of anyone in the world” due to the U.S. imposing an average tariff of 5.6% on Canadian goods, the lowest among its trading partners [5].

Critics, however, have argued that the move signals capitulation. Unifor President Lana Payne criticized the decision as enabling further U.S. aggression, while opposition leader Pierre Poilievre called it an unnecessary concession [10]. Carney, however, defended the decision as a necessary step to preserve Canada’s access to the U.S. market, which accounts for more than 75% of Canada’s exports [7].

The decision also aligns with broader diplomatic efforts to keep trade negotiations on a constructive path. While the majority of retaliatory tariffs are being removed, Canada will retain some sector-specific tariffs on steel, aluminum, and automobiles [10]. These measures are seen as a way to maintain leverage in the trade relationship while avoiding unnecessary economic friction.

Sources:

[1] title1 (https://www.cbc.ca/news/politics/canada-removing-retaliatory-tariffs-1.7614909)

[2] title2 (https://www.nytimes.com/2025/08/22/world/canada/canada-us-tariffs-drop-trump.html)

[5] title5 (https://www.politico.com/news/2025/08/22/carney-tariffs-trump-00519624)

[6] title6 (https://www.kltv.com/2025/08/22/canada-will-match-us-tariff-exemptions-under-usmca-trade-pact-prime-minister-carney-says/)

[7] title7 (https://www.cbc.ca/news/politics/livestory/carney-ends-most-counter-tariffs-as-trump-trade-talks-continue-9.6876782)

[9] title9 (https://www.wsj.com/world/americas/canada-to-remove-25-tariff-on-some-u-s-goods-1b40df8e?gaa_at=eafs&gaa_n=ASWzDAiD453L5jBUN211e43XcWMoEYKOhkqlZcUIanGtnhm3LFTie6l5kJ9s&gaa_sig=UIk-NRurtOaYmBSZE0jxmI54N8h5TAKpQahqH9E3MPWixyyPOth5VajWEYsmAJzpFauiwehBwuu1s30UTEFsyg%3D%3D&gaa_ts=68a9aaeb)

[10] title10 (https://www.sootoday.com/local-news/carney-announces-that-canada-is-dropping-many-retaliatory-tariffs-on-us-goods-11115778)