In a significant development in Canada-U.S. trade relations, Canadian Trade Minister Dominic LeBlanc announced that Canada will be dropping certain retaliatory tariffs on U.S. products. This decision aims to enhance Canada's negotiating power in discussions concerning U.S. President Donald Trump's tariffs, particularly those affecting key sectors, and to ease rising tensions ahead of a crucial review of the Canada-United States-Mexico Agreement (CUSMA).
LeBlanc emphasized the government's commitment to securing optimal trade conditions for Canadian workers and businesses. He stated, "We have to be prepared to sit constructively at a table with the other side of the table and have that conversation," highlighting the importance of negotiation. The announcement comes on the heels of Prime Minister Mark Carney's decision to align Canada's tariff policies with American exemptions for goods covered under CUSMA.
While Canada will remove some retaliatory tariffs, it is important to note that counter-tariffs on steel, aluminum, and automobiles will remain in place. Prime Minister Carney reported a phone conversation with President Trump, where Trump assured him that the revisions would facilitate the resumption of trade negotiations.
During discussions earlier this year, LeBlanc sought to find a resolution to the trade tensions before a pivotal deadline on August 1. He noted that Canada's retaliatory tariffs posed a "significant point of contention" for the Trump administration, particularly following Trump's decision to raise tariffs on Canadian goods to 35 percent. The White House attributed this increase to issues such as the flow of fentanyl and existing retaliatory tariffs.
Canadian officials have remarked that, thanks to CUSMA exemptions, Canada finds itself in a more favorable position than many other nations affected by Trump's trade policies. However, separate tariffs imposed on Canadian steel, aluminum, automobiles, and copper have inflicted considerable damage on Canadian industries.
LeBlanc confirmed ongoing dialogues with U.S. Commerce Secretary Howard Lutnick and mentioned recent communication regarding these issues. Canadian Ambassador to the U.S., Kirsten Hillman, has also been engaging with U.S. Trade Representative Jamieson Greer to address these challenges. Despite the ongoing discussions, the issue of Ottawa's counter-tariffs continues to be a contentious topic, with U.S. officials expressing concerns about Canada and China being the only nations to retaliate in response to Trump's trade declarations.
The Canadian government initially imposed a 25 percent tariff on a range of American goods as part of its retaliatory measures, which included products like oranges, alcohol, clothing, motorcycles, and cosmetics. U.S. Ambassador to Canada, Pete Hoekstra, recently stated that Canada's stance could endanger the future of CUSMA by targeting American goods that fall within the agreement's purview.
The trilateral trade pact, which replaced the North American Free Trade Agreement (NAFTA) during Trump's first administration, faces its first major review next year, with negotiations expected to commence in the fall. Observers suggest that Trump's inclusion of CUSMA exemptions in his tariff policy indicates his ongoing value for the trade agreement, even as he referred to it as a "transitional deal" in a meeting with Carney last May.
Both Carney and LeBlanc have warned that Canada is unlikely to return to pre-Trump trade conditions. As the CUSMA review approaches, LeBlanc indicated the necessity of aligning with the U.S. decision to exempt compliant products under the agreement. Canadian officials hope to transition trade discussions to focus on bilateral agreements that could alleviate tariffs imposed on strategic sectors like steel, aluminum, and automobiles before the CUSMA negotiations take shape.
Despite President Trump's apparent reluctance to adjust these duties, even for countries that have established trade agreements, LeBlanc expressed optimism regarding potential discussions around "a package of stuff" encompassing investment opportunities in sectors such as defense and security. He asserted the goal of creating a bilateral arrangement that would relieve pressure on Canada's economy’s most integrated sectors with the United States, stating, "We have a number of arguments that I hope might put us in a position to get that bilateral arrangement." This work is anticipated to take place in the weeks leading up to the detailed CUSMA review conversations with both the U.S. and Mexico.
This report originally surfaced on August 23, 2025, highlighting the ongoing complexities and developments within Canada-U.S. trade relations.
