The US is dropping plans for a 10% tariff on certain types of Canadian aluminium that President Donald Trump announced just last month.
The US said it was backing off after determining that imports were likely to decline after an earlier surge.
If the shipments do not fall as expected, officials said they would apply tariffs to the excess.
The reversal comes the same day that Canada was expected to unveil its plans for retaliation.
Officials had said they were planning to target C$3.6bn ($2.7bn, £2.1bn) in US aluminium products, calling the US move “unwarranted and unacceptable”.
US-Canada trade tensions
The US first imposed tariffs on foreign steel and aluminium in 2018, citing national security concerns. The move caused furore, especially among the country’s traditional allies in Europe and Canada. The Trump administration later exempted certain countries, including Canada, from the levies, which were also controversial within the US.
But at an event in Ohio last month, President Trump announced that he was re-imposing border taxes on certain types of Canadian aluminium, citing a flood of under-priced metal into the country.
The step was “absolutely necessary to defend our aluminium industry,” he said.
The US said the 2019 agreement that exempted Canada from the duties provided for monitoring of the imports and allowed tariffs to be re-imposed should volumes surge.
In Tuesday’s announcement that the 10% tariff would be dropped, retroactive to 1 September, the office of the US Trade Representative said it expected imports over the rest of 2020 to decline by 50% from the monthly average in the first seven months of the year.
“If imports exceed 105 percent of the expected volume in any month the United States may re-impose the 10% tariff going forward,” the office said, adding that it would review the state of the market with Canadian officials at the end of 2020.