Carney said Canada will include the carve-out that the U.S. has on Canadian goods under the 2020 free trade deal that shields the vast majority of goods from the punishing duties, easing Canada’s previous stance on holding the line on punitive tariffs until U.S. President Donald Trump relents more on those imposed by the U.S.

Some Canadian politicians and union leaders characterized Carney’s move as capitulation, but the prime minister accentuated what he considered Canada’s favorable position so far and said that the exemptions would jump-start further trade talks with Washington.

“Canada currently has the best trade deal with the United States. And while it’s different from what we had before, it’s still better than that of any other country,” Carney said.Carney and Trump spoke on the phone Thursday, and Carney met with his Cabinet on Friday before making the announcement.

“We had a very good call,” Trump said Friday in the Oval Office. “We are working on something. We want to be very good to Canada. I like Carney a lot. I think he’s a very good person.” He also said: “I am fighting for the United States, and Canada and Mexico have taken a lot of our business over the years.”

Carney said Trump told him that lifting the tariffs would reset trade negotiations. The United States-Mexico-Canada trade pact, or USMCA, is up for review in 2026, and Carney called the pact a unique advantage for Canada at a time when it is clear that the U.S. is charging for access to its market.

Carney said the commitment of the U.S. to the core of USMCA means that over 85% of Canada-U.S. trade continues to be free of tariffs. He said the U.S. average tariff rate on Canadian goods is 5.6% and remains the lowest among all its trading partners.

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

Former Prime Minister Justin Trudeau initially put on retaliatory tariffs in response to U.S. tariffs, but before the U.S. tariffs were applied the Trump administration exempted goods covered by the free trade deal.

Most imports from Canada and Mexico are still protected by the USMCA, but U.S. Commerce Secretary Howard Lutnick has said, “I think the president is absolutely going to renegotiate USMCA.”