Canada to lift retaliatory tariffs on US consumer goods to ease trade tensions

Canada is set to remove its retaliatory tariffs on a broad range of US consumer products that comply with the existing North American trade agreement, signaling a strategic effort to ease trade tensions with the United States.

Prime Minister Mark Carney is expected to announce the decision on Friday following a cabinet meeting, according to sources familiar with the matter who requested anonymity due to the sensitivity of the issue, Bloomberg reports.

The revised tariff policy will align Canada’s approach more closely with US measures under the US-Mexico-Canada Agreement (USMCA). This means many US-made consumer goods will no longer be subject to the 25% tariff upon importation into Canada, provided they meet the agreement’s provisions.

However, tariffs on US steel and aluminum products, as well as automobiles, are expected to remain in place. These sectors continue to face levies imposed by President Donald Trump, which Canada has reciprocated. The move to adjust tariffs on consumer goods is also designed to pave the way for the upcoming USMCA review anticipated in the coming months.

The decision marks a significant policy shift for Canada, which initially responded swiftly and aggressively to US protectionist measures, earning disapproval from the Trump administration and Commerce Secretary Howard Lutnick. This announcement follows a recent phone call between Carney and Trump, their first publicly acknowledged communication in weeks.

Earlier rounds of Canadian counter-tariffs, introduced under former Prime Minister Justin Trudeau, included 25% taxes on about C$30 billion (approximately $21.7 billion) of US goods ranging from orange juice and wine to clothing and motorcycles. In response to US steel and aluminum tariffs, Canada imposed levies on similar US metals products and consumer goods.

Since taking office, Carney has adopted a more cautious stance than his predecessor. “Carney campaigned and won a national election by promising an aggressive approach that would inflict ‘maximum pain’ on the US,” but as prime minister, “he has taken a more skeptical view of counter-tariffs than Trudeau did.”

In April, Carney’s finance minister introduced exemptions to allow tariff-free imports of certain US products and offered relief for automakers who maintain investment in Canada. Although Carney threatened retaliation when the US doubled tariffs on steel and aluminum, Canada did not follow through.

Despite these tariff disputes, inflation in Canada remains moderate. Statistics Canada reported a 1.7% increase in the consumer price index in July compared to the previous year, below the Bank of Canada’s 2% target. This suggests that counter-tariffs have not significantly fueled inflationary pressures.

Canada’s recalibrated tariff approach underscores its commitment to fostering stable trade relations with the US while preparing for the forthcoming USMCA negotiations.

By Vafa Guliyeva