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Canada has announced it will drop retaliatory tariffs on a wide range of US goods that comply with the United States-Mexico-Canada Agreement (USMCA).

Getting into it: Prime Minister Mark Carney said the rollback of tariffs, effective September 1, was a move to “re-establish free trade for the vast majority” of goods traded between the two countries and to create “a good foundation” for upcoming trade negotiations. The decision impacts a 25% tariff Canada had imposed in March on about $30 billion worth of American imports, including products like clothing, alcohol, and footwear. These tariffs were originally a response to US duties under President Trump, which included a recent 35% tariff on Canadian goods not USMCA-compliant.

Despite this rollback, Canada will maintain tariffs on key US sectors (specifically steel, aluminum, and automobiles), areas where American duties remain in effect and negotiations are ongoing. Carney stressed that these sector-specific tariffs are non-negotiable at this stage: “Let’s be absolutely clear: Canada currently has the best trade deal with the United States… While it is different from what we had before, it is still better than that of any country.” He also cited the 5.6% average tariff Canadian exports currently face, which is lower than the global average of 16%.

President Trump welcomed the move, calling it “nice” and praised Carney personally. “I like Carney a lot,” Trump told reporters. “He’s removing his retaliatory tariffs, which I thought was nice. And we’re going to have another call soon.”

Reaction among Canadian officials was mixed. Alberta Premier Danielle Smith endorsed the decision, saying, “Canadian tariffs on US goods primarily hurt Canadian citizens and businesses,” and adding that she supports diplomacy over retaliation. “I remain convinced that the path to a positive resolution… lies in strong, consistent diplomacy,” she posted on X.

However, others were critical. Conservative Leader Pierre Poilievre accused Carney of “showing weakness,” while Lana Payne, president of Unifor, called the decision damaging. “Trump’s attacks on auto, steel, aluminum and forestry sectors are hurting Canadian workers in real time,” Payne wrote. “Walking back counter-tariffs isn’t an olive branch. It only enables more US aggression… Backing down with concessions is not an option.”