Canada lifts reciprocal tariffs towards the US in an attempt to cement a deal with Trump
In a significant development, U.S. President Donald Trump suspended trade negotiations with Canada in response to the latter's implementation of a new digital services tax. This move escalated tensions between the two nations, long-standing allies and major trading partners.
On April 2, Trump announced a list of "reciprocal" tariffs on U.S. products, prompting Canada to retaliate with 25% tariffs on American goods. The Canadian digital services tax was eventually repealed on June 30, but not before it had contributed to a reduction in trade between the two nations.
Canadian Prime Minister Mark Carney, who assumed office in March 2025, has made negotiating a new trade and security agreement with the United States one of his main objectives. In a bid to facilitate such an agreement, Canada has been eliminating some tariffs on U.S. products.
The standoff between the two leaders began to unfold on the phone lines when Carney and Trump spoke on May 1. During the conversation, they addressed "the current commercial challenges, opportunities, and shared priorities within the framework of a new economic and security relationship between Canada and the U.S."
Following the phone call, Carney convened a meeting with his cabinet to discuss the commercial relationship with Trump. In a press conference the next day, Carney announced countermeasures, including tariffs on the U.S. automotive sector.
Justin Trudeau, the previous Canadian Prime Minister, described the tariffs as a "tragedy" and also announced countermeasures. Trump has not yet reached an agreement with Canada, despite Carney's efforts to negotiate a new trade and security agreement.
The tariffs implemented by both countries have had a significant impact on their trade relations. U.S. participation in Canadian exports has reduced to 68.3% in May, "one of the lowest proportions recorded," according to Canadian authorities.
In statements to the media, Trump praised the announcement by the Canadian President, expressing his desire to be "good" with Canada and reach an agreement. However, on August 1, Trump announced a 35% tariff on certain goods from Canada, effective immediately.
Amidst the ongoing negotiations, Trudeau rejected the idea of Canada becoming the "51st state" of the U.S., reiterating Canada's commitment to maintaining its sovereignty and independence.
As the negotiations continue, both nations hope to find a resolution that will restore the robust trade relationship they once shared.
