Prime Minister Mark Carney announced Canada will be dropping retaliatory tariffs on some U.S. products at a press conference in Ottawa on Friday.Spencer Colby/The Canadian Press
Prime Minister Mark Carney announced Friday that Canada is removing retaliatory tariffs on some U.S. products in a bid to reset trade discussions with the White House that have stalled in recent weeks.
He said Ottawa will remove tariffs on U.S. goods that comply with North American free-trade deal rules, mirroring a key carve-out U.S. President Donald Trump made for Canadian goods.
Canada will retain its countertariffs on steel, aluminum and autos, Mr. Carney said, as both countries work “intensively” to find arrangements for these industries – all of which have been hammered by U.S. sectoral duties, known as Section 232 tariffs.
Prime Minister Mark Carney says on Sept. 1 Canada will drop some retaliatory tariffs on American products to match U.S. tariff exemptions for goods covered under the USMCA. Carney made the announcement at a news conference in Ottawa after meeting with his cabinet.
The Canadian Press
He said Canada is watering down one part of its retaliatory regime so it can focus on getting relief for the hardest-hit sectors, while preparing for the renewal of the United States-Mexico-Canada Agreement, which is scheduled for next year. The change takes effect on Sept. 1.
“There is a time in a game … when you go hard in the corners, your elbows up,” Mr. Carney said, using a hockey metaphor he leaned on heavily during his election campaign earlier in the year.
“But there’s also a time in a game where you want the puck, you want to stick handle, you want to pass and want to put the puck in the net. And we’re moving later into the game. We’re at that time of the game.”
The announcement was made a day after Mr. Carney and Mr. Trump spoke by phone for the first time in months and the first time since Ottawa and Washington failed to reach a trade agreement by Mr. Trump’s Aug. 1 deadline.
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Mr. Carney said the two countries’ negotiating teams have begun to re-engage, and talks would focus on “strategic” industries facing Section 232 tariffs, as well as the lumber industry, which has been hit by different U.S. tariffs.
This includes steel, aluminum and copper, which are subject to 50-per-cent U.S. tariffs, and automobiles, which are subject to 25-per-cent tariffs, with a carve-out for U.S. parts. Canada’s countertariffs on steel and aluminum remain at 25 per cent as Ottawa decided not to respond in June when Mr. Trump increased the metal tariffs.
“Canada and the United States will intensify our discussions to address current trade challenges in strategic sectors and to seize major immediate opportunities for trade, investment and security partnerships,” Mr. Carney said.
Canada is one of only two countries that retaliated against Mr. Trump’s efforts to remake the global trading system with the highest tariffs since the 1930s. The other country is China.
In an unrelated press conference on Friday, Mr. Trump called Canada’s decision to drop the tariffs “nice” and reiterated his personal liking of Mr. Carney.
“We’re going to have another call soon. We had a very good call,” Mr. Trump told reporters. He said he hoped for an agreement with Canada but provided no details on what it might look like or how close it was.
“We are working on something. We want to be very good to Canada. I like Carney a lot, I think he’s a good person, and we had a very good talk yesterday,” Mr. Trump said.
Canada imposed three rounds of countertariffs earlier this year covering nearly $100-billion worth of U.S. goods. However, it soon started adjusting the measures, offering carve-outs for U.S. goods used in Canadian manufacturing, and exemptions for U.S. auto companies that keep making cars in Canada.
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Economists have debated whether retaliatory tariffs, which push up domestic prices, do more harm than good if they don’t force the other side to back down.
Ottawa has made other efforts to try to secure a deal with Mr. Trump, including increasing spending on the military and border security and scrapping the digital services tax that hit U.S. tech companies.
Federal Conservative Leader Pierre Poilievre lambasted Mr. Carney in a press conference after the announcement. He said he was pleased to hear Mr. Carney and Mr. Trump spoke by phone but was disappointed with the outcome.
“I was expecting that, when the call was reported, we would find that President Trump had given us something in return... But not so. Today we learned it is yet another capitulation and climb down by Mark Carney. His elbows have mysteriously gone missing.”
Despite missing Mr. Trump’s Aug. 1 deadline and having the blanket U.S. tariff on Canadian goods rise to 35 per cent from 25 per cent, Mr. Carney said that Canada remained in a comparatively good position.
Since the start of the trade war, Mr. Trump has given an exemption to the blanket tariff for all Canadian products that comply with USMCA rules of origin. He reaffirmed this exemption on Aug. 1.
That carve-out has shielded much of the Canadian economy, allowing around 85 per cent of Canadian exports to continue entering the U.S. free of duties, and making the average U.S. effective tariff rate on Canadian goods only 5.6 per cent – the lowest of any U.S. trade partner – Mr. Carney said. Those numbers are close to private-sector estimates.
“Let’s be absolutely clear, Canada currently has the best trade deal with the United States, and while it’s different from what we had before, it is still better than that of any other country,” Mr. Carney said.
Ottawa had originally been seeking a deal with the U.S. that removed all tariffs. However, the string of deals Mr. Trump reached with other trade partners in recent months, which left tariffs in place, suggested this was an unrealistic goal, Mr. Carney said.
Ontario Premier Doug Ford, who has advocated robust retaliation, said he spoke to Mr. Carney after the announcement to stress the need for an agreement for the hardest-hit sectors.
“If the federal government can’t achieve that, they need to hit back hard against U.S. tariffs and provide additional supports for the workers and businesses in these sectors,” Mr. Ford said in a social media post.
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The announcement drew mixed responses from organized labour and the business community. Unifor president Lana Payne said in a social media post that “we should not give it away unless the U.S. also drops all punitive tariffs. Backing down with concessions is not an option.”
Business Council of Canada president Goldy Hyder said it was “a necessary step to preserve and strengthen our preferential trade relationship.”
Catherine Fortin LeFaivre, a senior vice president at the Canadian Chamber of Commerce, said Canada’s top priority should be preserving the USMCA. She said Mr. Carney’s team may be acting on information that’s unknown to the public. “The question is how many concessions are too many?” she said.
Mr. Carney said Canada would begin consultations around USMCA renewal next month.
“CUSMA, in a very different trade environment, is going to look different. And what we need to do is to make sure we’re focusing on areas where the mutual benefits are very clear,” he said, using the Canadian name for the trade agreement.
With reports from Ian Bailey and Nojoud Al Mallees