Carney says Canada will drop most retaliatory tariffs on U.S.

OTTAWA — Prime Minister Mark Carney announced on Friday that Canada will remove retaliatory tariffs on U.S. goods covered by the existing trade agreement between the countries, but would keep in place Canadian tariffs on steel, aluminum and autos.

Carney said the move was designed to match the U.S. decision not to levy tariffs on goods that are compliant with the Canada-United States-Mexico Agreement, saying the countries had restored free trade on a “vast majority of our goods.”

“We have the best deal of anyone in the world right now. We have the lowest tariff rate on average — a little over 5.5 per cent versus the 16 per cent average for the world, and in many cases much higher,” said Carney. “It’s important that we preserve that.”  

The announcement comes the day after Carney spoke to U.S. President Donald Trump by phone, the first conversation between both world leaders since early summer.  

A short readout of the call by Carney’s office yesterday said the leaders had a “productive and wide-ranging conversation” in which they discussed “current trade challenges, opportunities, and shared priorities.”  

It made no mention of Carney proposing to eliminate counter-tariffs on U.S. goods.  

The move is certain to irritate proponents of an “elbows up” strategy who would like to see Canada inflict maximum retaliatory damage on the U.S. in response to Trump’s escalation of the trade war with Canada.  

But it’s likely to relieve economists such as Bank of Canada Governor Tiff Macklem who argue that the counter-tariffs implemented by ex-Prime Minister Justin Trudeau in the winter were inflationary at a time of economic fragility.  

In a June speech in Newfoundland, Macklem said that counter-tariffs “make US imports more expensive and put upward pressure on inflation.”  

“If the current tariffs and counter-tariffs remain in place, past experience suggests pass-through of about 75 per cent of the costs of tariffs over roughly a year and a half,” he added.  

A Léger-Postmedia poll released last week suggested a smaller but still non-negligible number of Canadians (45 per cent) believe Canada should impose counter-tariffs on all new U.S. border levies, even if it risks further retaliation from the Trump administration.  

On the flip side, 41 per cent of respondents said they’d prefer Canada’s response be “measured” and focus more on getting a new trade deal even if it includes some tariffs on Canadian goods.  

Six months ago, similar polling found that 73 per cent of Canadians polled by Léger supported dollar-for-dollar retaliatory tariffs against any U.S. border levy on Canadian goods. 

More to come .

National Post

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