Canada's finance minister says the U.S. economy still faces significant risks despite a last-minute deal to keep income taxes from rising on the middle class and the poor.

While Jim Flaherty is pleased to see an agreement south of the border to avoid the so-called fiscal cliff, he says the United States isn't out of the woods yet.

"Canada welcomes the agreement reached between the president and the Congress that protects the U.S. economy in the short term," he said in a statement Wednesday.

"That said, there remain a number of significant risks to the U.S. economic outlook. It is my hope that leaders in the United States continue to work together to develop future action that will put the U.S. fiscal position on a sustainable path."

Congress has been deeply and bitterly split over the fiscal deal for months. But the Republican-led House of Representatives voted to support the bill passed by the Democrat-controlled Senate, averting a crisis.

Had an agreement not been reached, economists warned that tax increases for most Americans could have sent the country spiralling back into recession.

The agreement reached late Tuesday night includes a tax hike for Americans earning more than $400,000 a year and couples earning $450,000 or more, while preserving middle-class tax cuts that were to expire in 2013.

But with one political showdown behind them, U.S. lawmakers face more battles in the months ahead over spending cuts and on raising the country's limit on borrowing.