Canada is softening its trade fight with the United States — but not backing down completely.

Prime Minister Mark Carney announced on Friday that Canada will drop some of its retaliatory tariffs on US products, though key levies on autos, steel, and aluminium will stay in place. The decision follows his first phone call with President Donald Trump since the two countries missed a deadline to reach a new trade agreement.

What’s Changing?

Canada had slapped a 25% tariff on C$30 billion worth of US goods, covering everything from orange juice to washing machines. Those tariffs were retaliation against Trump’s move to hit Canadian exports with a 35% tax if they didn’t comply with the US-Mexico-Canada Agreement (USMCA).

Now, Ottawa says it will match Washington by ending tariffs on goods that qualify under the free trade deal — restoring free trade on the majority of cross-border products. The new rules will kick in on September 1st.

Carney argued the move helps “re-establish free trade for the vast majority” of goods and protects Canada’s unique trade advantage, which leaves its effective tariff rate far below that faced by most countries.

What Stays in Place?

While some levies are being lifted, Canada is keeping its counter-tariffs on US autos, steel, and aluminium — industries that are crucial to its economy. Economists warn that US tariffs in these sectors are “hugely disruptive,” especially since Canada is one of America’s top suppliers of steel and aluminium.

The auto industry is particularly vulnerable. Manufacturing in Ontario has already taken a hit, with 38,000 jobs lost in just three months, much of it linked to trade uncertainty.

Political Fallout

The decision has already sparked political debate at home. Conservative leader Pierre Poilievre accused Carney of “capitulating” to Trump, saying the prime minister’s once tough “elbows up” approach to trade talks has suddenly “gone missing.”

Carney defended his decision, saying Canada still has a better deal than most countries — and that his priority is protecting Canadian businesses and jobs. “It’s important we do everything we can to preserve this advantage,” he said.