Canada removed many of its retaliatory tariffs on US goods Friday, signaling a major thaw in trade tensions between the two countries. Prime Minister Mark Carney said the rollback will match US exemptions on goods covered under the United States-Mexico-Canada trade deal (USMCA).

The carve-out mirrors the US approach under the 2020 pact, which shields the majority of goods from punishing duties. 'Canada currently has the best trade deal with the United States. And while it´s different from what we had before, it's still better than that of any other country,' Carney said.

The move is designed to reset trade talks between the two countries. The USMCA is up for review in 2026, and Carney called the trade pact a unique advantage for Canada at a time when it is clear that the US is charging for access to its market.

Retaliatory tariffs were first imposed by former Prime Minister Justin Trudeau in response to US duties. The Trump administration later exempted goods covered by the trade deal. Carney said the commitment of the US to the core of USMCA means the US average tariff rate on Canadian goods remains one of its lowest, and that over 85 percent of Canada-U.S. trade continues to be free of tariffs.

Canadian and Mexican companies can claim preferential treatment under the USMCA. Most imports from Canada and Mexico are still protected by the USMCA, but U.S. Commerce Secretary Howard Lutnick has said: 'I think the president is absolutely going to renegotiate USMCA.'

Preserving the free trade pact will be critical for Canada and Mexico. More than 75 per cent of Canada´s exports go to the US while more than 80 percent of Mexico´s exports go there.

Trump has announced some sector specific-tariffs that do apply for Canada despite the USMCA - known as 232 tariffs - which are having an impact on the Canadian economy. There is a 50 percent tariff on steel and aluminum imports, for example. 'Canada and the United States have reestablished free trade for the vast majority of our goods. Canada will retain our tariffs on steel, aluminum and autos as we work intensively to resolve the issues there,' Carney said.