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By Peter Aitken and Gabe Whisnant
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Canada is dropping retaliatory tariffs to align with U.S. exemptions for goods covered under the United States-Mexico-Canada Agreement, a government official said Friday.
The official said Canada will mirror the U.S. carve-out on Canadian goods under the 2020 trade pact, which shields most products from the duties.
The official spoke on condition of anonymity because they were not authorized to discuss the decision ahead of an expected announcement by Prime Minister Mark Carney.
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Why It Matters
The U.S. and Canada have remained in a tense standoff since before President Donald Trump even took office for his second term, with Trump making various comments about why Canada should look to join the U.S. and the means by which he could make that happen.
The matter escalated just months into office when Trump announced a range of reciprocal tariffs against major trading partners, including Canada, which elected Carney seemingly in response to Trump's various statements and the growing tariff issue.
Most recently, Trump accused Canada of having "financially retaliated against the United States," prompting him to threaten the northern nation with a 35 percent tariff, to which Carney promised to defend his nation's economic interests, stressing that he is "committed to continuing to work with the United States."
What To Know
Carney spoke with President Donald Trump on Thursday in what Carney's office described as "a productive and wide-ranging conversation" on trade and other issues.
An official familiar with the talks told The Associated Press that Canada will include the carve-out the U.S. has on Canadian goods under the 2020 free trade deal that shields the vast majority of goods from the punishing duties.
Most of the imports from Canada and Mexico are protected by the USMCA free trade deal, but Commerce Secretary Howard Lutnick has said Trump is "absolutely going to renegotiate USMCA." Thanks to the conditions set by the current deal, 75 percent of Canada's exports and more than 80 percent of Mexico's exports go to the U.S.
While fielding questions in the White House on Friday, Trump called Carney's decision "nice" and said that he would hold another call with Carney "soon" to discuss further policy details.
"I'm fighting for the United States. Canada and Mexico have taken a lot of our business over the years - over 25, 30 years, especially during the Biden years, they took a lot of our business, and it's basically all coming back into the United States now," Trump said, adding that the U.S. economy is "hot as a pistol," crediting his tariffs as a major factor.
"I like Carney a lot, he's a good person, and we had a very good talk yesterday," Trump added.
Trump has separately discussed sector-specific tariffs that would apply to Canada despite the USMCA deal, known as 232 tariffs, such as a 50 percent tariff on steel and aluminum imports, the U.S. announced earlier this year.
What Happens Next
Carney will visit Mexico in September to meet with his counterpart, President Claudia Sheinbaum, the Associated Press reported, citing a senior official familiar with the matter.
Mexico, Canada, and the United States continue to hold talks with an eye towards a review of the free trade deal between the three nations, which will occur next year.
This article includes reporting by the Associated Press.
Update 8/22/25, 1:42 p.m. ET: This article has been updated with additional information.
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