Canada drops almost all retaliatory tariffs on U.S.

Canada has suspended nearly all of its retaliatory tariffs on U.S. products, easing inflation concerns and improving its economic outlook, according to Oxford Economics. Prime Minister Mark Carney’s new approach is aimed at protecting Canadian growth while avoiding a prolonged trade war.

Key Details:

• Canada’s effective tariff rate on U.S. goods is now “nearly zero” after broad exemptions were announced.
• Retaliatory duties remain on select U.S. products like orange juice, alcohol, coffee, clothing, and cosmetics.
• Oxford Economics upgraded Canada’s 2025 growth forecast to 0.9% despite predicting a mild recession.

Diving Deeper:

Canada’s government, under Prime Minister Mark Carney, has rolled back most of its retaliatory tariffs on U.S. goods, according to a new report from Oxford Economics. The decision comes after months of escalating trade tensions that began with the Trump administration’s tariffs earlier this year. In response, Canada initially slapped 25% import taxes on approximately C$60 billion ($43 billion) worth of U.S. goods and imposed additional levies on American automobiles.

However, Carney’s administration has since introduced a strategic six-month exemption for a wide range of U.S. products crucial to Canadian industries. Items used in manufacturing, processing, food and beverage packaging, health care, public safety, and national security are now largely exempt. Automakers, including major employers like General Motors Co., are also benefiting, as some U.S.-made vehicles can now enter Canada tariff-free.

Oxford Economics noted that with these exemptions, the real tariff-rate hike against U.S. goods is “nearly zero,” a move it called a “very strategic approach” to avoid harming Canada’s domestic economy. Tony Stillo, Oxford’s director of Canada economics, praised Carney’s leadership for prioritizing economic stability over political retaliation.

Still, not all U.S. goods escaped the tariffs. Products like orange juice, alcohol, coffee, clothing, and cosmetics remain subject to higher import taxes.

Carney, who recently won election by promising to manage the U.S.-Canada trade relationship effectively, has emphasized the need to strengthen Canada’s domestic economy. His government is planning increased spending on infrastructure and housing while pursuing new trade and security partnerships outside of the U.S. Unlike his predecessor, Justin Trudeau, Carney has rejected a strict “dollar for dollar” retaliation policy.

Despite these moves, Oxford Economics still forecasts a mild recession for Canada this year. However, it raised its growth expectations, projecting 0.9% growth in 2025 and 0.3% in 2026. Inflation is expected to briefly spike to 3% in 2026 before stabilizing.

Source: https://www.todayville.com/canada-drops-almost-all-retaliatory-tariffs-on-u-s/