Canada is dropping retaliatory tariffs to match U.S. tariff exemptions for goods covered under the United States-Mexico-Canada trade pact, Prime Minister Mark Carney announced Friday.

Carney said Canada will include the carve-out that the U.S. has on Canadian goods under the 2020 free trade deal that shields the vast majority of goods from the 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.

Carney and U.S. President Donald Trump spoke on the phone Thursday, and Carney met with his Cabinet on Friday before making the announcement.

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 U.S. is charging for access to its market.

Carney said the commitment of the U.S. to the core of USMCA means that over 85% of Canada-U.S. trade continues to be free of tariffs. He said the U.S. average tariff rate on Canadian goods is 5.6% and remains the lowest among all its trading partners.