The US has paused a threatened punitive tariff on Canada, just hours before it was scheduled to be imposed. Following the announcement, Canadian Prime Minister Mark Carney said that "substantial progress" had been achieved towards a trade deal, though he noted that further work was required.
This eleventh-hour decision on Tuesday comes after a contentious year for the two nations. Their longstanding alliance has been impacted by reciprocal tariffs and online comments from US President Donald Trump, who has previously suggested turning Canada into a US state.
In February 2025, the White House imposed a 25% tariff on Canada, citing what it considered insufficient progress in addressing cross-border illegal immigration and drug trafficking. Canada responded by announcing a reciprocal levy, describing the US actions as "unwarranted and unreasonable."
In 2024, trade between Canada and the US was estimated to be around $909bn, according to the office of the US trade representative.