The long-simmering tariff standoff between Washington and Ottawa has cooled—for now. On Friday, Canadian Prime Minister Mark Carney announced that Canada would suspend most of its retaliatory tariffs on the United States after the Trump administration reaffirmed its commitment to the U.S.-Mexico-Canada Agreement (USMCA).
It’s a striking concession. Just months ago, Canada had slapped a 25% duty on a wide swath of American goods in retaliation for Trump’s tariffs on Canadian steel and aluminum. The move sparked fears of a North American trade war, with Ottawa boasting it would “stand firm” against Washington’s economic pressure. Yet after weeks of back-and-forth, Canada has effectively blinked.
Carney framed the rollback as a pragmatic adjustment, noting that U.S. clarifications on tariff policy leave Canada in a uniquely favorable position. “The actual U.S. tariff rate on Canadian goods is 5.6%,” he said, contrasting that with the global average of 16%. More than 85% of cross-border trade, he emphasized, is now tariff-free. By his own admission, Canada enjoys “the best trade deal with the United States.”
Still, the olive branch is only partial. Ottawa is keeping its 25% levy on U.S. steel, aluminum, and vehicles—industries outside the direct protections of USMCA and politically sensitive in both countries. But on everything else, the retaliatory measures are being lifted, clearing the way for smoother flows of goods and less disruption for businesses on both sides of the border.
Behind the diplomatic choreography lies Trump’s characteristic pressure politics. In late July, he signed an order authorizing tariffs of up to 35% on Canadian goods. Though most products were later exempted under the USMCA framework, the move rattled Ottawa.
Bloomberg reported that Commerce Secretary Howard Lutnick directly warned Canadian officials that the retaliatory tariffs risked backfiring and urged them to step aside to clear the path for negotiations.
Carney ultimately relented after what he described as a “productive and wide-ranging” phone call with Trump. The White House called Canada’s decision “long overdue,” with officials signaling that Ottawa’s retreat was necessary groundwork for future talks. The USMCA itself is set for review later this year, making this détente a crucial prelude to larger negotiations.
What emerges is a familiar pattern in Trump’s trade strategy: use tariffs as leverage, endure the initial backlash, and wait for the other side to fold. For Canada, the numbers didn’t lie. Despite the rhetoric of resistance, the U.S. remains its indispensable trading partner, and the costs of escalation outweighed the optics of standing firm.
Now Carney is floating something bigger—“a new form of trade and security partnership with the United States.” Whether that means deeper military-economic alignment or simply a rebranded NAFTA 2.0 remains to be seen. What’s certain is that Trump has once again forced America’s neighbors to the table, not with subtle persuasion but with tariffs wielded like a hammer.
And in this round, Ottawa has clearly decided it’s better to bend than break.
