Canada drops some retaliatory tariffs on the US

Canada | The Canadian government has removed all tariffs on goods from the United States, including alcohol, that are covered by the United States-Mexico-Canada trade agreement (USMCA) on 1 September.

The Canadian Prime Minister, Mark Carney, said Canada will maintain its 25 percent tariffs on steel, aluminium and autos, while his Liberal government works with the US to craft a new trade agreement between the two countries. The current USMCA expires in 2026 and preserving the free trade pact will be critical for Canada and Mexico. More than 75 percent of Canada’s exports go to the US, compared with more than 80 percent of Mexico’s exports.

The move brings Canada in line with the US, which has not imposed tariffs on goods that fall under USMCA. However, the US has placed a 50 percent tariff on all steel and aluminium imports, except for those from the UK, as well as copper imports, along with tariffs on auto imports.

Canada and China are the only countries that have retaliated against Mr Trump in his trade war. Canada imposed 25 percent tariffs on a long list of American goods in March, including oranges, alcohol, clothing and shoes, motorcycles and cosmetics.

Capitulation or clever politicking

Some Canadian politicians and union leaders called Mr Carney’s move a capitulation, but the Prime Minister stressed that the removals would facilitate further trade talks with Washington.

Eric Gregory, President of the Kentucky Distillers' Association, applauded Prime Minister Mark Carney’s decision to restore reciprocal zero-to-zero tariffs for Kentucky Bourbon. “We hope this action will jump start negotiations on a permanent trade deal, benefiting both American businesses and Canadian consumers seeking to enjoy America’s only native spirit.”

The trade disputes have roiled leaders in the American distilled spirits industry, which has enjoyed a considerable export market. In 2024, Kentucky exported USD 751 million worth of spirits.

US alcohol embargo still in place

But industry members remain sceptical about the tangible impacts Canada's tariff reversal would have without action from provinces to restart the import of US alcohol.

In February, Canadian provinces put an embargo on American alcohol and removed beer, whiskey and other booze from the shelves of their alcohol shops. So far, only two smaller provinces – Alberta and Saskatchewan – have allowed the return of American alcohol.