Prime Minister Mark Carney announced that Canada will eliminate many retaliatory import tariffs on US goods and enhance discussions with the United States to establish a new trade and security relationship.

While tariffs on US autos, steel and aluminum will remain for now, Carney highlighted that the US has indicated it will not impose tariffs on Canadian goods compliant with the USMCA free trade agreement.

“In this context and consistent with Canada’s commitment to USMCA, I am announcing today that the Canadian government will remove all tariffs on US goods covered under USMCA”, Carney stated at a press conference in Ottawa. He emphasised that Canada and the US have effectively re-established free trade for most goods.

Following the announcement, the Canadian dollar strengthened, rising 0.5% to C$1.3837 against the US dollar.

Canada has been engaged in talks with the US regarding a new economic and security framework, although a comprehensive deal is not yet in sight.

Both Canada and China have responded to US tariffs with countermeasures, causing frustration with the US administration.

A White House official welcomed Canada’s move, calling it “long overdue”, and expressed eagerness to continue discussions on trade and national security concerns.

Carney confirmed he discussed the tariff issue with President Donald Trump on Thursday, indicating that lifting the tariffs could facilitate negotiations.

Since winning election in April on a platform of challenging Trump’s tariffs, Carney has softened his stance, recently abandoning plans for a digital services tax and easing threats of further sanctions.

Carney used an ice hockey analogy to describe the need for a more moderate approach stating, “Let’s be clear, we have the best deal of anyone in the world right now”.

However, this shift could pose political challenges for Carney, whose minority Liberal government relies on opposition support to pass confidence votes.

The Conservative Party leader has criticised Carney for significant tariffs on US imports in response to initial US duties.