WASHINGTON – A day into Donald Trump’s continental trade war, the U.S. president continued to insist his tariffs would benefit America — even as a key member of his team floated the idea of a compromise that could materialize Wednesday.
U.S. Commerce Secretary Howard Lutnick said in an interview on Bloomberg TV Wednesday morning that he expects Trump will make an announcement regarding the tariffs on Canada and Mexico this afternoon.
Lutnick suggested the tariffs will remain at 25 per cent but said some categories of goods might be exempted, including the auto sector.
He said there could be some categories left out if they are compliant with the rules under the United States-Mexico-Canada Agreement that was negotiated in Trump’s first term.
“The president is listening to the offers from Mexico and Canada. He’s thinking about trying to do something in the middle,” Lutnick said.
“It will be 25 per cent, but there will be some categories left out. It could well be autos, could be others as well.”
Trump addressed a joint session of Congress Tuesday night for the first time since he returned to office in January. He defended his massive tariff agenda.
“We have been ripped off for decades by nearly every country on Earth and we will not let that happen any longer,” Trump told lawmakers in Washington.
The president’s executive order hitting Canada and Mexico with 25 per cent across-the-board tariffs, with a lower 10 per cent levy on Canadian energy, took effect Tuesday.
Prime Minister Justin Trudeau called Trump’s trade war “dumb” and said Canada was being forced to push back. He framed Trump’s ultimate tariff goal as “a total collapse of the Canadian economy, because that will make it easier to annex us.”
Ottawa introduced immediate 25 per cent retaliatory tariffs on $30 billion worth of American products, which will expand to cover another $125 billion in U.S. goods in 21 days.
Mexican President Claudia Sheinbaum said her government would announce duties on targeted products and other measures Sunday.
“There is no motive or reason, nor justification, that supports this decision that will affect our people and our nations,” she said.
The tariffs caused immediate market turbulence as many business and industry groups condemned the trade assault on America’s neighbours.
Clips of Ontario Premier Doug Ford threatening to cut off electricity to the United States played repeatedly on U.S. TV stations. Images of American liquor being pulled from shelves in Canadian stores suggested what could come next if Trump continues his trade war.
Minutes after U.S. stock markets closed after a second day of sharp decline, Lutnick told Fox Business that the government was looking to “work something out” in a deal that could be announced on Wednesday.
“It’s not going to be a pause. None of that pause stuff,” he said. “Somewhere in the middle will likely be the outcome.”
Finance Minister Dominic LeBlanc spoke with Lutnick on Tuesday but Foreign Affairs Minister Mélanie Joly told CBC News she had not heard about any “middle” deal. Joly was set to speak with U.S. Secretary of State Marco Rubio on Wednesday.
It’s not clear what Trump would consider as a concession.
Lutnick tied the possible deal to the Canada-U.S.-Mexico agreement, which was negotiated under the first Trump administration to replace the North American Free Trade Agreement.
Trump has previously connected the duties to a wide range of complaints about Canada’s defence spending and trade deficits. Trump has said repeatedly he wants to make Canada a U.S. state.
Lutnick’s comments support Canadian officials’ argument that tariffs are not actually connected to the flow of deadly fentanyl over the border — the legal pretext Trump is using to impose the tariffs. U.S Customs and Border Protection data shows the volume of drugs crossing from Canada into the United States is tiny compared to the amount coming in from Mexico.
“We think it’s a bogus argument,” Joly said.
Tuesday was the first big test of how the markets would react to Trump’s massive trade agenda.
Trump also ordered 25 per cent tariffs on all steel and aluminum imports into the United States on March 12 — duties the White House has confirmed would stack on top of the other duties imposed on Canada.
Trump signed an executive order to implement “reciprocal tariffs” starting April 2. Other tariff targets include automobiles, copper, lumber and agricultural products.
— With files from The Associated Press
This report by The Canadian Press was first published March 5, 2025.
