Carney says time is up for 'elbows up' as Canada drops many retaliatory tariffs on U.S.

OTTAWA — Prime Minister Mark Carney said it’s no longer time for “elbows up” as he announced Friday that Canada will remove retaliatory tariffs on U.S. goods covered by the existing trade agreement between the countries minus those on steel, aluminum and autos.

Carney said the move was designed to match the U.S. decision not to levy tariffs on goods that are compliant with the Canada-United States-Mexico Agreement (CUSMA), saying the countries had restored free trade on a “vast majority of our goods.”

“We have the best deal of anyone in the world right now. We have the lowest tariff rate on average — a little over 5.5 per cent versus the 16 per cent average for the world, and in many cases much higher,” said Carney. “It’s important that we preserve that.”

The move will remove roughly half of the U.S. items on which Canada imposed 25 per cent counter tariffs earlier this year.

Canada’s counter-tariffs on steel, aluminium and autos will remain, though Carney also said he would not immediately double the 25 per cent tariffs on the first two to match the value of U.S. tariffs.

The announcement comes the day after Carney spoke to U.S. President Donald Trump by phone, the first conversation between both world leaders since early summer.  

A short readout of the call by Carney’s office Thursday said the leaders had a “productive and wide-ranging conversation” in which they discussed “current trade challenges, opportunities, and shared priorities.”  

It made no mention of Carney proposing to eliminate counter-tariffs on U.S. goods. Friday, the prime minister said Trump had committed to relaunching trade negotiations if Canada dropped its border levies on non-CUSMA U.S. goods.

https://twitter.com/MarkJCarney/status/1958924505461792874

Trump told reporters at the White House after the announcement that he appreciated Carney’s decision and that he liked the prime minister “a lot”.

“We’re going to have another call soon. We had a very good call,” Trump said of Carney. “We are working on something, we want to be very good to Canada.”

The move is certain to irritate proponents of an “elbows up” strategy who would like to see Canada inflict maximum retaliatory damage on the U.S. in response to Trump’s escalation of the trade war with Canada.  

It also signals a 180-degree pivot from Carney’s support of dollar-for-dollar retaliatory tariffs during the Liberal party leadership campaign in February and a significant change from his own “elbows up” message during the following election campaign.

Ontario Premier Doug Ford wrote on social media that he told Carney that a new deal to remove tariffs on key industries like steel, autos, lumber and copper.

“ If the federal government can’t achieve that, they need to hit back hard against U.S. tariffs and provide additional supports for the workers and businesses in these sectors ,” Ford wrote.

Pressed by reporters Friday on how he squared the announcement with his promise to go toe-to-toe with Trump during the spring election campaign, Carney said that the context had changed and it was time to move on from “elbows up”.

“There is a time in a big (hockey) game, and this is a big game, when you go hard in the corners, you elbows up,” he said. “And we’ve done that, pretty uniquely in the world.”

“But there’s also a time in the game when you want the puck, you want to stick-handle, you want to pass, you want to put the puck in the net. And we’re… at that time in the game.”

But the announcement is likely a relief to many business groups and economists who argue that the counter-tariffs implemented by ex-Prime Minister Justin Trudeau in the winter were inflationary at a time of economic fragility.

The Business Council of Canada said the announcement was “necessary” while the Canadian Chamber of Commerce said the government’s focus should remain on getting a new “durable, predictable” deal with the U.S.

In a June speech in Newfoundland, Bank of Canada Governor Tiff Macklem said that counter-tariffs “make U.S. imports more expensive and put upward pressure on inflation.”  

“If the current tariffs and counter-tariffs remain in place, past experience suggests pass-through of about 75 per cent of the costs of tariffs over roughly a year and a half,” he added.

Conservative Leader Pierre Poilievre accused Carney of genuflecting to the Americans while climbing down from his promises to be tough on the U.S. during negotiations.

“I was expecting that when the call (with Trump) was reported, that we’d find that President Trump had given us something in return,” Poilievre said.

“But not so. Today, we learned that it has been yet another capitulation and climb down by Mark Carney. His elbows have mysteriously gone missing.”

A Léger-Postmedia poll released last week suggested a smaller but still non-negligible number of Canadians (45 per cent) believe Canada should impose counter-tariffs on all new U.S. border levies, even if it risks further retaliation from the Trump administration.  

On the flip side, 41 per cent of respondents said they’d prefer Canada’s response be “measured” and focus more on getting a new trade deal even if it includes some tariffs on Canadian goods.  

Six months ago, similar polling found that 73 per cent of Canadians polled by Léger supported dollar-for-dollar retaliatory tariffs against any U.S. border levy on Canadian goods. 

National Post

cnardi@postmedia.com

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