OTTOWA (TNND) — Canada announced on Friday that it is dropping its 25% retaliatory tariffs on most U.S. goods as a way to revamp the trading relationship after the two countries failed to negotiate before Trump's self-imposed Aug. 1 deadline.

However, the tariffs stay in place for goods that do not comply with the U.S.-Mexico-Canada Agreement (USMCA), including U.S. steel, aluminum and automobiles, according to Prime Minister Mark Carney.

The move comes one day after Carney and President Donald Trump had a conversation described as "productive" and pledged to reconvene on trade.

"We focused on trade challenges, opportunities, building a new economic and security relationship between Canada and the U.S., and supporting long-term peace and security for Ukraine and Europe," Carney said after the call.

Canada is the only country out of the Group of Seven that failed to reach a tariff deal before Trump's deadline.

Trump's executive order imposed a 35% tariff on goods not covered under USMCA for "a lack of cooperation in stemming trafficking in illicit drugs across the northern border."

Carney criticized Trump's justification, saying, "Canada accounts for only 1% of US fentanyl imports and has been working intensively to further reduce these volumes."