Canada will remove many of its retaliatory import tariffs on US goods and step up talks with Washington on a new trade and security partnership, Prime Minister Mark Carney announced.

Tariffs on US autos, steel, and aluminium will remain in place for now. Carney said the move followed assurances from Washington that it would not impose duties on Canadian goods covered under the US-Mexico-Canada Agreement (USMCA).

“Canada and the US have now re-established free trade for the vast majority of our goods,” Carney told reporters, noting that Canadian exports still faced relatively low tariff levels compared with other partners.

The announcement lifted the Canadian dollar, though officials acknowledged a final agreement with the United States remained distant. Carney confirmed he had spoken with President Donald Trump on Thursday, who described the decision as a “nice thing” and said both sides were “working on something.”

Carney, who came to power in April promising to resist Trump’s tariffs, has softened his stance in recent months. He scrapped a planned digital services tax in June and dropped threats of further sanctions in July. However, he has held firm on keeping 25% tariffs on US steel and aluminium in response to Trump’s earlier hike to 50%.

Analysts warned progress could be slow. “Getting to a final deal isn’t going to be easy. The list of US demands is long,” said Brian Clow, a former senior adviser on US relations.

Carney said Canada would now focus on strategic sectors still under pressure, including steel, autos, and lumber, as well as the upcoming USMCA review.