Canada and the United States Re-Establish Free Trade

The Canadian government has announced that it will now match the United States by removing all tariffs on U.S. goods covered under the Canada-United States-Mexico Agreement (CUSMA), effective September 1, 2025, re-establishing free trade for the vast majority of goods between the two nations. This decision comes as the United States has fundamentally transformed its trading relationships, imposing tariffs on strategic industries and limiting relief on certain sectors. Canada has implemented retaliatory tariffs to protect its workers and businesses, but the two nations have now reaffirmed their commitment to CUSMA, ensuring that compliant Canadian exports will not be subject to U.S. tariffs.

Key Takeaways:

• The United States has imposed tariffs on strategic industries such as steel, aluminum, autos, and copper, with the average U.S. tariff rate increasing from 2% to almost 16% since last year.
• Canada will retain tariffs on steel, aluminum, and autos as it works with the U.S. to resolve outstanding trade issues in these sectors.
• The Canadian government will launch new consultations next month to assess Canadian priorities in the new global trade environment.
• Canada and the U.S. will intensify discussions to address current trade challenges and seize opportunities for trade, investment, and security partnerships.
• The United States is the world's largest economy, and Canada is its most important commercial partner, with many Canadian companies driving American competitiveness.
• The Canadian government will announce a new comprehensive industrial strategy to protect Canadian jobs, boost competitiveness, and diversify exports.
• Canada will select new nation-building projects to connect and transform its economy, create higher-paying careers, and develop stronger trade partnerships.

Statistics:

• The average U.S. tariff rate has increased from 2% to almost 16% since last year.
• Over 85% of Canada-U.S. trade is now tariff-free.
• The actual U.S. average tariff rate on Canadian goods is 5.6%, the lowest among all U.S. trading partners.
• Canada is the second-largest foreign investor in the U.S.

Sources:

• Office of the Prime Minister of Canada