Trade Truce: Canada Ends Retaliatory Tariffs on US Goods, Paving Way for USMCA

In a significant development for North American trade relations, Canada formally lifted its 25% retaliatory tariffs on a wide array of US goods, effective July 1, 2020. This move was a direct response to the United States' decision to remove its controversial Section 232 tariffs on Canadian steel and aluminum imports, marking a long-awaited resolution to a contentious trade dispute.

The tit-for-tat tariff battle began in 2018 when the Trump administration imposed tariffs on steel (25%) and aluminum (10%) from Canada, citing national security grounds.

Canada, along with other US allies, vehemently rejected these justifications and retaliated with duties on US steel, aluminum, and over 70 other consumer and industrial products, including popular items like whiskey, coffee, ketchup, and lawnmowers. These Canadian tariffs, which targeted goods valued at approximately C$16.6 billion, took effect on July 1, 2018.

The resolution to this trade spat was crucial for the successful implementation of the new North American trade agreement, the United States-Mexico-Canada Agreement (USMCA), which replaced the 25-year-old NAFTA.

The agreement to drop all tariffs was initially announced in May 2019, a pivotal moment that cleared a major hurdle for the ratification of the USMCA in all three member countries. Without this tariff resolution, the new trade pact would have faced significant political and economic challenges.

The elimination of these retaliatory measures fostered a more harmonious trade environment just as the USMCA came into force.

This development was widely seen as a positive step towards normalizing trade relations between two of the world's largest trading partners, offering relief to industries on both sides of the border that had been impacted by the heightened tariffs. It underscored the commitment of both nations to moving forward under the framework of the new trade agreement, promoting stability and predictability in North American commerce.