Most of the counter-tariffs Ottawa slapped on U.S. goods earlier this year have now been removed, with a few exceptions.
Canada placed duties on $60 billion worth of U.S. goods in response to American tariffs on various Canadian goods. Those tariffs are gone as of Monday, though some levies remain on non-CUSMA-compliant goods — such as tariffs on steel and aluminum products to counter U.S. tariffs targeting those industries.
Prime Minister Mark Carney announced on Aug. 22 the tariffs would be coming off, arguing they were a sticking point in negotiations with the U.S. and that doing so was in Canada’s economic interest.
Canada-U.S. Trade Minister Dominic LeBlanc travelled to Washington last week — the first time since July — to meet with U.S. Commerce Secretary Howard Lutnick.
Asked if Canada is now ‘elbows down,’ Prime Minister Mark Carney says the country has ‘the lowest tariff rate on average’ after showing it’s willing to fight. But he says this is a ‘big game’ that has now moved to a different stage.
Although he characterized the conversation as constructive, LeBlanc told Radio-Canada host Patrice Roy on Wednesday that the two countries aren’t on the verge of an agreement.
The trip “helped us move forward in the sense that we better understood the work that remains to be done,” LeBlanc said in French.
“We are not on the verge of having an agreement, but we are making progress.”
Canada-U.S. Trade Minister Dominic LeBlanc said his meeting Tuesday with U.S. Commerce Secretary Howard Lutnick was ‘productive,’ while a source tells CBC News Canadian negotiators see a window of opportunity to reach a trade deal.
The minister didn’t offer details on what needs to be resolved, but the government is under pressure to make progress with the Americans after dropping the counter-tariffs.
Conservative Leader Pierre Poilievre has accused Carney of showing “weakness” on the international stage.
The move was “yet another capitulation and climb-down by Mark Carney,” Poilievre said the day Carney announced the counter-tariffs would end.
“His elbows have mysteriously gone missing.”
Speaking after Prime Minister Mark Carney announced the removal of some retaliatory tariffs on U.S. goods, Conservative Party Leader Pierre Poilievre said Carney has broken his biggest election campaign promise.
Carney and his government have also faced criticism from workers and producers still impacted by sectoral U.S. tariffs.
Catherine Cobden, president and CEO of the Canadian Steel Producers Association, said in a statement last month that removing counter-tariffs was a “disappointment.”
“Reciprocal tariffs protect Canada’s industries and workers during this trade war,” the statement read.
Marty Warren, national director of the United Steelworkers (USW), criticized the move in his own statement.
“The federal government must remain steadfast in working to not only safeguard and protect Canadian workers but aggressively build Canadian economic resiliency,” he said.
How did we get here?
U.S. President Donald Trump had been signalling he wanted new tariffs even before he returned to the White House in January.
Days after being sworn in, Trump signed an executive order taxing Canadian exports to the U.S. at 25 per cent, except energy, critical minerals and potash, which were hit with a rate of 10 per cent.
Those tariffs took effect on March 4 and Canada immediately hit back with tariffs on $30 billion worth of U.S. goods. Two days later, Trump amended the tariffs to exclude products that comply with the terms of the Canada-U.S.-Mexico Agreement (CUSMA).
A week later, Trump put a 25 per cent tariff on all steel and aluminum imports. Canada responded with further counter-tariffs on an additional $29 billion worth of U.S. goods — including steel and aluminum products.
In April, after threatening to impose a 25 per cent tariff on automobiles and auto parts from outside the U.S., Trump watered down the levy so it only applies to parts that aren’t CUSMA-compliant and the non-U.S. portion of assembled vehicles. Canada responded in kind with a 25 per cent tariff on vehicles imported from the U.S. that are not CUSMA-compliant.
In June, Trump doubled his tariffs on steel and aluminum to 50 per cent. While the tariffs apply to all imports, Canada is the top supplier of both metals to the U.S.
Canada and the U.S. set an Aug. 1 deadline to reach some sort of agreement on tariffs, but the deadline passed without a resolution. Trump then upped tariffs on non-CUSMA-compliant goods to 35 per cent and added a 50 per cent tariff on certain copper imports — again, a product where Canada is a major U.S. supplier.
Is any of this violating CUSMA?
Whether or not the U.S. or Canada have broken the trade deal signed during Trump’s first term seems to depend on who you ask.
Trump’s sectoral tariffs — which cover goods under CUSMA’s umbrella — use national security justifications.
Carlo Dade, the international policy director at the University of Calgary’s school of public policy, said national security exemptions are in most trade agreements.
“You’re not going to sacrifice your security for the sake of honouring a trade agreement. It’s just common sense,” he told CBC News.
Mark Warner, an international trade lawyer, said CUSMA’s national security exemption is a bit unique in that it relies on “self-judgment” for what constitutes a national security concern.
“It can’t be second-guessed by a dispute settlement panel,” he said.
Dade said that Trump’s national security claims on Canada are pretty flimsy and that the U.S. is violating the “spirit” of CUSMA, if not the letter.
For example, Trump has referred to fentanyl coming into Canada — despite the northern border accounting for a tiny fraction of the drug seized by U.S. authorities — as a reason for taxing some Canadian products. The president has also said that ensuring steel and aluminum is manufactured in the U.S. is a security priority.
Dade calls this a loophole “that you could drive a tractor-trailer through.”
But Warner suggested that from the American perspective, Canada hasn’t always held up the spirit of the agreement either, pointing to disputes over how Ottawa has implemented dairy quotas as an example.
“I don’t find it all that useful to try and figure out who’s to blame here,” he said. “It’s just like arguments between kids in the playground.”
Where to from here?
It is unclear when or if Canada and the U.S. will reach an agreement.
Warner estimates that Canada will have to accept a “tariff-rate quota” on steel, aluminum and copper — where the U.S. agrees to import a certain amount of those Canadian products before duties are applied.
Some of Trump’s tariffs are also facing legal challenges in the U.S., which — if successful — may help the Canadian cause, Dade said.
“It doesn’t mean that the tariff threat is gone. But it means that the machine gun is taken away and the president is left with the 9-mm,” he said.
But those cases are still working their way through the courts. On Friday, an appeals court deemed Trump’s fentanyl-related tariffs unlawful, but allowed the levies to remain in place while the case likely makes its way to the U.S. Supreme Court.
A challenge under CUSMA would also take time — and Warner argues might not be effective.
“The only way out of this is to sort of get through some kind of a negotiation,” he said.
The trade agreement is also up for review next year. Carney said the government is preparing for those CUSMA talks but that his priority is the current tariff spat.
