Canada Drops Tariffs on U.S. in Restart of Trade Negotiations – Full Text of Prime Minister Carney’s Statement

On Thursday (August 21st), President Trump had a conversation with Canadian Prime Minister Mark Carney. The next day, the prime minister announced the removal of all reciprocal tariffs on American goods covered by the United States-Mexico-Canada Agreement (USMCA or CUSMA, as they like to order the countries and call it in Canada):

“… I am announcing today that the Canadian government will now match the United States by removing all of Canada’s tariffs on U.S. goods specifically covered under CUSMA. This decision will take effect on September 1, 2025. In short, Canada and the U.S. have now re-established free trade for the vast majority of our goods,” Prime Minister Carney said in a statement.

When he mentions matching the U.S., the prime minister is referring to the Trump Administration’s reciprocal and border- and fentynal-related tariffs not applying to goods covered by the USMCA deal. Here’s how Prime Minister Carney laid that out in his statement:

In a positive development, earlier this month, the United States reaffirmed a core commitment to our free trade agreement, Canada-United States-Mexico Agreement (CUSMA), by reinforcing that those Canadian exports to the United States that are compliant with CUSMA will not be subject to U.S. IEEPA [International Emergency Economic Powers Act, from which President Trump derives some of his tariff-levying power] tariffs. As a result, the actual U.S. average tariff rate on Canadian goods is 5.6% and remains the lowest among all its trading partners, and more than 85% of Canada-U.S. trade is now tariff-free.

Things have not looked good lately for a new trade deal between the U.S. and Canada. Talks were terminated between the countries at the end of June. President Trump’s call with Prime Minister Carney was obviously a productive one as Friday’s announcement from the prime minister is part of returning to positive trade negotiations between the countries:

… Canada and the U.S. have now re-established free trade for the vast majority of our goods. 

Canada will retain our tariffs on steel, aluminum and autos as we work intensively with the U.S. to resolve the issues there. 

Indeed, our focus now is squarely on these strategic sectors and the future.

…

… following my conversation with the President of the United States yesterday, Canada and the United States will intensify our discussions to address current trade challenges in strategic sectors and to seize major immediate opportunities for trade, investment and security partnerships.

Looming over all of this is that the USMCA is up for review and revision in 2026. While Canada is an important trade partner for the U.S., Canada is reliant on the U.S. as a trade partner. Over 75% of Canadian exports go to the U.S., which boasts the world’s largest economy. Prime Minister calls Canada’s current trade deal with the U.S. the best of all countries’ trade deals with the U.S. Canada can’t afford a bad deal and falling into poor trade relations with America.

Ultimately, the U.S. has a great deal of leverage as trade negotiations now reopen with Canada. There’s no doubt the Trump Administration means to capitalize on it. An AP article published by NPR quoted President Trump as saying the following after his call with Prime Minister Carney:

“We had a very good call,” Trump said Friday in the Oval Office. “We are working on something. We want to be very good to Canada. I like Carney a lot. I think he’s a very good person.” He also said: “I am fighting for the United States, and Canada and Mexico have taken a lot of our business over the years.”

It will be interesting to see what kind of trade deal ends up being made between Canada and the United States.

Here’s the full text of Prime Minister Carney’s statement:

Statement by the Prime Minister on CAN-U.S. trade

[https://www.pm.gc.ca/en/news/statements/2025/08/22/statement-prime-minister-can-us]

August 22, 2025
Ottawa, Ontario

“Throughout our negotiations with the United States on a new trade and security relationship, the objectives of Canada’s new government have been constant:

• To protect Canadian workers and their families
• To reinforce the competitiveness of Canadian businesses
• To build the strongest economy in the G7. 

These negotiations have been taking place as the United States has been fundamentally transforming all its trading relationships. This new U.S. trade policy has several motivations: raising tariff revenues, protecting strategic industries, encouraging foreign investment in the U.S., and changing trade and non-trade policies in U.S. partners.

To these ends, the U.S. has announced a series of trade actions, beginning with International Emergency Economic Powers Act (IEEPA) tariffs against Canada and Mexico based on U.S. concerns about the border and fentanyl trafficking. This was followed by reciprocal tariffs on every U.S. trade partner, and very high sectoral tariffs applied globally on strategic industries, including steel, aluminum, autos, and copper. The U.S. has also imposed substantial trade actions on the Canadian lumber industry. 

In recent weeks, the U.S. has agreed on a series of trade deals with a variety of countries that have several aspects in common: 

• Base line tariffs, covering a broad range of goods, that are substantially higher than those that existed before. The average U.S. tariff rate on the world has jumped from just over 2% at the end of last year to almost 16% currently;
• Limited or no relief from the sectoral tariffs in strategic industries such as steel and autos;
• Substantial commitments by U.S. trade partners for investments in the United States; and,
• Significant unilateral trade liberalization measures by the U.S. trade partners.

As a result of these developments, the breadth and depth of the changes in U.S. trade policy have become more fully apparent. Specifically, under the new U.S. approach, countries must now ‘buy access to the world’s largest economy’ through tariffs, investments, unilateral trade liberalization, and policy changes in their home markets. 

In previous trade disputes, Canada has implemented a series of retaliatory tariffs. Their objectives have been to protect Canadian workers and businesses, and to incentivize a negotiated settlement with the United States. Few other countries have followed suit.

In a positive development, earlier this month, the United States reaffirmed a core commitment to our free trade agreement, Canada-United States-Mexico Agreement (CUSMA), by reinforcing that those Canadian exports to the United States that are compliant with CUSMA will not be subject to U.S. IEEPA tariffs. As a result, the actual U.S. average tariff rate on Canadian goods is 5.6% and remains the lowest among all its trading partners, and more than 85% of Canada-U.S. trade is now tariff-free. 

Let’s be 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. As we work to address outstanding trade issues with the U.S., it is important we do everything we can to preserve this unique advantage for Canadian workers and their families. Doing so will require both building on a soon-to-be revised CUSMA and developing a new form of trade and security partnership.

In this context and consistent with Canada’s commitment to CUSMA, I am announcing today that the Canadian government will now match the United States by removing all of Canada’s tariffs on U.S. goods specifically covered under CUSMA. This decision will take effect on September 1, 2025. In short, Canada and the U.S. have now re-established free trade for the vast majority of our goods. 

Canada will retain our tariffs on steel, aluminum and autos as we work intensively with the U.S. to resolve the issues there. 

Indeed, our focus now is squarely on these strategic sectors and the future.

The Canadian government will begin our preparations for the CUSMA review process due next year by launching new consultations starting next month to assess Canadian priorities in the new global trade environment. 

In addition, following my conversation with the President of the United States yesterday, Canada and the United States will intensify our discussions to address current trade challenges in strategic sectors and to seize major immediate opportunities for trade, investment and security partnerships.

There are many such opportunities. The United States is the world’s largest, most dynamic economy, and Canada is one of its most important commercial partners. Canada is the second-largest foreign investor in the U.S., and many of our companies are essential to the complex supply chains that drive American competitiveness. Canada is embarking on a transformation of our military and security capabilities to defend Canadians – investments that will create multiple opportunities for new defence and security partnerships.

As we develop our new trade relationship with the U.S., Canada will continue to take all measures necessary to support Canadian workers, businesses, and consumers. 

To address challenges in strategic sectors from agriculture to autos, the Canadian government will soon announce a new comprehensive industrial strategy that protects Canadian jobs, boosts Canadian competitiveness, buys Canadian goods, and diversifies Canadian exports. 

In parallel, we are focused on building our strength at home – building Canada strong. The Canadian government will soon select the first in a series of new nation-building projects that will connect and transform our economy. We will catalyze investment and create higher-paying careers through our new Defence Industrial Strategy. We will transform Canadian strategic sectors that are being severely impacted by U.S. Trade. We will double the pace of homebuilding in Canada and create a new housing industry. We will develop new and stronger trade partnerships throughout the world.

For decades, as a result of a series of trade agreements, the Canadian and U.S. economies have become steadily more integrated, continually more deeply connected. As I have emphasized in recent months, that process is now over. As a result, some of our historic strengths have become vulnerabilities. 

We can and must adjust to this new reality. That means concentrating on trade, investment and security partnerships that preserve our sovereignty. And it means striking new trade deals that are robust to different economic circumstances and governments because of mutual benefits to both countries.

In all these ways, Canada will move from reliance to resilience: building our strength at home, developing new markets abroad, creating new opportunities for Canadian workers and businesses as we build the strongest economy in the G7.”