Former Prime Minister Justin Trudeau initially put on retaliatory tariffs in response to US tariffs, but before the US tariffs were applied, the Trump administration exempted goods covered by the free trade deal.
Most imports from Canada and Mexico are still protected by the USMCA, but US Commerce Secretary Howard Lutnick has said, “I think the president is absolutely going to renegotiate USMCA.”
Preserving the free trade pact will be critical for Canada and Mexico. More than 75% of Canada’s exports go to the US, while more than 80% of Mexico’s exports go there.
Trump has announced some sector-specific tariffs that do apply for Canada despite the USMCA — known as 232 tariffs — which are having an impact on the Canadian economy. There is a 50% tariff on steel and aluminium imports, for example.
“Canada and the United States have reestablished free trade for the vast majority of our goods. Canada will retain our tariffs on steel, aluminium and autos as we work intensively to resolve the issues there,” Carney said.
Carney previously rescinded Canada’s plan to tax US technology firms after Trump said he was suspending trade talks over those plans, which he called “a direct and blatant attack on our country.”
CANADA IS MATCHING WHAT US IS DOING
The prime minister disputed any notion that Canada is appeasing Trump, noting that Canada is matching what the US is doing.
“The president and I had a long conversation,” Carney said. “There is a review of the free trade agreement in the spring. We’re starting our preparations.”
The official said the move is designed to reset trade talks between the two countries. The trade agreement is up for review in 2026.
