Canada plans to eliminate a significant number of retaliatory tariffs on U.S. products that align with the North American trade agreement. Prime Minister Mark Carney is expected to announce this decision during a news conference on Friday after discussions with his cabinet.

The change in tariff policy aims to ease tensions with the United States. Sources familiar with the matter, who spoke on the condition of anonymity, indicated that a wide range of U.S.-made consumer goods will no longer incur a 25 percent tariff when imported into Canada, provided they comply with the Canada-United States-Mexico Agreement (CUSMA).

However, tariffs on U.S. steel and aluminum products, as well as on automobiles, are likely to remain in place. These sectors have been subject to tariffs imposed by President Donald Trump. The Canadian government’s decision is also seen as a preparatory step for the upcoming review of CUSMA, which is anticipated to begin in the coming months.

This policy shift marks a significant change for Canada, which had been one of the few countries to quickly retaliate against U.S. protectionist measures. This response has previously frustrated Trump and Commerce Secretary Howard Lutnick. The announcement follows a recent phone conversation between Carney and Trump, their first publicly acknowledged discussion in weeks.

Canada's initial round of counter-tariffs was implemented in early March, imposing a 25 percent tax on approximately $30 billion worth of U.S. goods, including orange juice, wine, clothing, and motorcycles. A second round of tariffs was introduced in response to Trump's tariffs on foreign steel and aluminum. Former Prime Minister Justin Trudeau had also opted for tariffs against U.S. metal products, affecting about $30 billion in annual U.S. shipments.

Carney, who campaigned on a platform of aggressive trade measures, initially retaliated against Trump's automotive tariffs with similar levies on U.S.-manufactured vehicles. However, as Prime Minister, he has adopted a more cautious approach to counter-tariffs compared to Trudeau. Earlier this year, his finance minister announced exemptions allowing certain U.S. imports to enter Canada tariff-free, particularly for automakers like General Motors Co. and Stellantis NV, provided they maintain manufacturing and investment in Canada.

Despite threats to retaliate when the U.S. doubled tariffs on steel and aluminum to 50 percent, Canada did not follow through. The country also maintained its counter-tariffs despite the U.S. increasing its fentanyl tariffs on Canadian goods. Economists at Bank of Nova Scotia estimate that the effective U.S. tariff rate on Canadian goods is currently below 7 percent. Additionally, Statistics Canada reported that counter-tariffs have not significantly impacted inflation, with the consumer price index rising only 1.7 percent in July, below the Bank of Canada’s target of 2 percent.