If Mexican tomatoes are subject to a 20% tariff in the U.S. and a 25% tariff in Canada, but the U.S. and Canada allow unrestricted trade with each other, what type of trade agreement do these two countries have?

Explanation

A free-trade area is characterized by member countries eliminating tariffs among themselves while maintaining their own external tariffs against non-members. Since the U.S. and Canada trade freely with each other but impose different tariffs on Mexico, they form a free-trade area rather than a customs union or other deeper integration.