WASHINGTON (AP) — Commerce Secretary Howard Lutnick indicated that potential exemptions could be on the horizon for the 25 percent tariffs imposed on Canada and Mexico by President Donald Trump, signaling a shift in the U.S. stance following a tax increase on Tuesday that impacted the stock market, raised consumer concerns, and initiated a trade war.
READ MORE: Stocks plummet as trade tension escalates between the U.S. and major partners, erasing S&P 500 gains since the election
However, Trump’s tariffs have created tension among allies who view his trade policies as misguided. Canada has proposed that it may reject any moves to diminish the recently implemented tariffs. The situation is further complicated by the White House’s assertion that additional tariffs on imports are expected in April, amidst growing fears from businesses and consumers about the potential economic ramifications, including stunted growth, escalating inflation, and job losses.
Nevertheless, the administration is navigating the repercussions of tariffs championed by Trump that could undermine his political objective to reduce costs. Although the president has acknowledged that his tariffs may inflict some financial hardship, he has consistently suggested that these measures would foster increased domestic investment and factory jobs.
In a Wednesday interview with Bloomberg Television, Lutnick mentioned that Trump would provide an update on his tariff strategy later in the day, potentially sparing certain sectors, like the automotive industry, from the import levies.
“Let’s be clear: there will be tariffs,” Lutnick stated. “But the considerations are about which market segments he might — possibly — provide relief to until we reach April 2.”
On April 2, Trump plans to unveil what he refers to as “reciprocal” tariffs intended to counterbalance the tariffs, taxes, and subsidies from other nations. This could significantly heighten global tariff rates while heightening the risk of a broader tariff conflict.
A senior official told The Associated Press that Canadian Prime Minister Justin Trudeau is unwilling to retract Canada’s retaliatory tariffs unless Trump eliminates any tariffs on the country, with the official speaking on condition of anonymity due to lack of authorization to comment publicly.
READ MORE: Trudeau condemns Trump for igniting a “very foolish” trade war with Canada while accommodating Russia’s Putin
Other Canadian officials are voicing similar sentiments publicly.
“We’re not interested in meeting halfway with reduced tariffs. Canada expects the tariffs to be fully removed,” stated Canadian Finance Minister Dominic LeBlanc during an interview with the Canadian Broadcasting Corporation.
Lutnick mentioned that he would speak with Trump on Wednesday morning concerning potential options regarding Canada and Mexico, noting both countries are addressing the U.S. president’s concerns about drug trafficking. He anticipated that Trump would announce his decision later that afternoon.
On Tuesday, Trump imposed a 25 percent tax on imports from Canada and Mexico, and applied a lower 10 percent tax on Canadian energy products like oil and electricity. He also raised the previously 10 percent tariff on China to 20 percent. The administration claims these tariffs aim to combat the smuggling of drugs such as fentanyl, although Trump suggested they also address ongoing U.S. trade deficits.
The tariffs quickly prompted retaliatory responses from Canada and China, with Mexico set to announce its response on Sunday. The U.S. stock market has reverted to pre-election levels since Trump’s electoral victory, while consumers, already stressed by inflation, fear that the tax increase will lead to higher prices. These concerns may have spurred Lutnick to hint at a possible reversal in a Tuesday afternoon interview with the Fox Business Network.
“I think he’ll realize that more is needed, and he’ll find a way to negotiate a middle ground,” Lutnick told Fox Business Network, comments that resulted in the stock market lessening its losses for the day.
Yet, during his joint address to Congress on Tuesday night, Trump appeared determined to press forward with the tariffs.
The U.S. president downplayed any potential economic damage as merely “a little disturbance,” asserting that external economic forecasts predicting heightened inflation and slower growth were exaggerated.
“There may be a slight adjustment period,” he said, confidently claiming that farmers would benefit from reciprocal tariffs imposed by countries that have tariffs on U.S. exports. “You will have to bear with me; this will ultimately be for the better.”
Trump also mentioned in his address that he spoke with “all three, the top officials” from the major U.S. automakers, stating that “they’re very enthusiastic.” The major auto manufacturers include General Motors, Ford, and Stellantis, all of which rely on imports from Mexico and Canada as part of their supply chains.
Ontario Premier Doug Ford warned that the automotive sector in both the U.S. and Canada could halt production within about 10 days due to the tariffs.
“People will lose their jobs,” he cautioned.
Trudeau remarked on Tuesday that Canada would impose tariffs on over $100 billion worth of American goods within 21 days, emphasizing that the United States has forsaken a long-standing friendship.
“Today, the United States has declared a trade war against Canada, their closest ally and friend, while simultaneously seeking constructive dialogue with Russia, appeasing Vladimir Putin, a deceitful and murderous dictator. Can anyone make sense of that?” Trudeau questioned on Tuesday.
Mexico is also poised to announce its countermeasures on Sunday.
China retaliated with tariffs of up to 15 percent on a broad range of U.S. agricultural exports and expanded the list of U.S. companies subject to export controls and other restrictions by approximately two dozen.
“If a war is what the U.S. desires – be it a tariff war, trade war, or other engagements – we are prepared to fight until the end,” the Chinese embassy in the U.S. stated on X late Tuesday night.
In response to China, U.S. Defense Secretary Pete Hegseth told Fox News Channel’s “Fox & Friends” that the United States is “prepared” for confrontation with the world’s second-largest economy.
“Those who aspire for peace must be ready for war,” Hegseth said Wednesday morning. “To deter conflict with China or any other nation, we must project strength.”
Gillies reported from Toronto.
