Canada to Remove Retaliatory Tariffs on U.S. Goods Amid Trade Thaw

Canada is set to remove retaliatory tariffs on a wide range of U.S. products that meet the criteria outlined in the existing North American trade agreement, signaling a potential thaw in the tense trade relationship between the two countries. The decision, announced amid ongoing negotiations and diplomatic efforts, is seen as a key step toward reducing trade friction and supporting struggling Canadian businesses [1].

The move comes after a series of high-level discussions between Canadian and U.S. officials, with Canadian Prime Minister Mark Carney expressing openness to revisiting retaliatory measures that had previously been defended as necessary countermeasures to U.S. tariff hikes. Carney acknowledged the need for a more flexible approach, stating that Canada is “looking at what we can do for our industry that’s most effective” and indicating that in some cases, removing tariffs could be the best course of action [2].

The initial retaliatory tariffs were imposed in response to U.S. levies on Canadian steel, aluminum, and copper, as well as the threat of further trade escalations. These measures have had a tangible impact on Canadian small businesses, with the Canadian Federation of Independent Business (CFIB) warning that nearly 40 per cent of small businesses could face failure within a year if trade policies remain unchanged. An even more dire projection suggests that 19 per cent of small businesses may not survive the next six months under current conditions, with many reporting increased costs and declining revenues [3].

As part of a broader economic response, the Canadian government announced a $1.2-billion support package for the lumber industry, which has been particularly hard-hit by the trade conflict. This financial aid, combined with the proposed tariff reductions, is intended to provide immediate relief to industries most affected by U.S. trade policies [2].

Canada’s decision to ease tariffs also places the country in a more cooperative stance within the larger context of U.S. trade relations. It is the only G7 nation that had not reached a prior agreement with the U.S. on tariff issues before an August 1 deadline, and the removal of retaliatory measures could serve as a turning point in what has been a difficult period for bilateral trade [4].

The move is expected to provide some relief to U.S. exporters and potentially open the door for further diplomatic progress. However, the long-term success of this initiative will depend on whether the U.S. responds in kind and whether additional tariff threats—such as those targeting pharmaceuticals—can be avoided or minimized [1].

The development highlights Canada’s ongoing effort to balance domestic economic concerns with the need to maintain stable trade relations with its largest trading partner. As discussions continue, the international community will be watching closely to see if this olive branch leads to a broader resolution of the trade dispute.

Sources:

[1] title1 (https://www.bloomberg.com/news/articles/2025-08-22/canada-to-drop-many-retaliatory-tariffs-in-olive-branch-to-trump)

[2] title2 (https://www.msn.com/en-us/money/other/carney-says-he-ll-look-at-opportunities-to-remove-tariffs-on-us/ar-AA1JY7j0?apiversion=v2&batchservertelemetry=1&cvid=9DAC270F1D7E4547A81D85318F827722&domshim=1&noservercache=1&noservertelemetry=1&ocid=windirect&renderwebcomponents=1&wcseo=1)

[3] title3 (https://financialpost.com/entrepreneur/small-business/small-businesses-year-tariff-changes-cfib)

[4] title4 (https://www.morningstar.com/news/dow-jones/202508218988/canada-pm-carney-touts-productive-call-with-president-trump-over-trade-2nd-update)