Lutnick Says USMCA Compliant Goods Could Be Spared From 25% Tariffs

With two days of falling stocks -- the Dow Jones Industrial Average and S&P 500 dropped more than 1.2% on March 4 -- Trump took to his social media site to defend his approach: "IF COMPANIES MOVE TO THE UNITED STATES, THERE ARE NO TARIFFS!!!"

However, late in the afternoon, after defending the use of tariffs to force Mexican and Canadian manufacturing to move to the U.S., Commerce Secretary Howard Lutnick told Fox Business that he'd been talking to Mexican and Canadian representatives all day, and the universal tariffs could be partly rolled back.

"You do more [on stopping fentanyl], and I'll meet you in the middle some way," is how the president is thinking about it, he said, "and we're going to probably be announcing that tomorrow."

For goods that meet USMCA rules of origin, "the president is considering giving you relief. If you haven't lived under those rules, well, then you've got to pay the tariff. He's really looking carefully at that."

However, Lutnick said the 20% emergency tariffs on China are not changing because China is not cracking down on opiate and opiate precursor exporters.

"You thumb your nose at this president, you're going to get something back big and strong," he said.

Canadian Prime Minister Justin Trudeau, at a press conference in Ottawa, said the pretext for the tariffs is that Canada is unwilling to help the U.S. stop fentanyl smuggling, and "that is totally false." He said fentanyl from Canada is well under 1% of the drugs interdicted, and less than 1% of illegal immigration is from the North.

"There is absolutely no justification or need whatsoever for these tariffs today," he said.

Sen. James Lankford, R-Okla., defended the rationale for pushing Canada on fentanyl with tariffs in a hallway interview at the Capitol five hours before Lutnick spoke, but also said he believes "we absolutely need to preserve USMCA."

"What I think happens now is, the President lays out his agenda, he deals obviously with fentanyl, and they come to the negotiating table." When asked if that meant the tariffs could be rolled back in weeks, he replied, "Oh, days, actually."

Canada's and Mexico's retaliation plans do create room for the president to back down; Mexico is not going to announce its countermeasures until March 9, and the bulk of Canada's tariffs are planned 21 days from now. Trudeau also said they're considering non-tariff measures that could hurt the U.S., but did not say what.

However, Canada is immediately imposing 25% tariffs on $30 billion worth of imported goods from the U.S. The duties, effective March 4, apply to hundreds of tariff lines, including certain agricultural products; meats, poultry and fish; timber; rubber goods; beauty products; tobacco; clothes; hand tools; home appliances; and a range of other commercial goods.

As Trudeau talked about this, Trump, apparently watching on TV, said: "Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!" Trump calls him "Governor Trudeau" because he says that Canada cannot survive a trade war with the U.S., and therefore, it should become the 51st state.

Trudeau was asked by a reporter if he really believed fentanyl was the reason behind Trump's tariffs.

"The facts show very clearly that in terms of taking action on fentanyl, we're doing everything that is necessary, not just for the United States, but for ourselves as well. The numbers bear that out."

He said fentanyl "is the legal justification he must use," but given Trump's own comments, Trudeau believes, "What he wants is to see a total collapse of the Canadian economy. Because that will make it easier to annex us.... That will never happen."

Trudeau acknowledged that jobs could be lost in Canada if the tariffs stay on, but spoke directly to Americans, saying jobs in their country were at risk too, and that prices would rise on the goods they rely on from Canada.

"We don't want this. We don't want to see you hurt, either, but your government has chosen to do this to you," he said.

American politicians also said the trade war would hurt constituents. Sen. Ron Johnson, R-Wis., said he's not privy to White House discussions on what Canada or Mexico could do to get Trump to roll back the tariffs, imposed under the International Emergency Economic Powers Act, or IEEPA.

"I do know the harm it's going to cause the economy, and the stock market is showing it," he said in a hallway interview at the Capitol. "Unfortunately, Congress across the board has ceded so much of its Constitutional authority to the president, so not much we can do other than express our concerns."

Johnson had tried to advance a bill to curtail the president's ability to impose tariffs under Section 232 during Trump's first term, but the Senate Finance Committee, where he is a member, never took it up.

Other Republicans were equally fatalistic about their lack of power.

Sen. Rand Paul, R-Ky., currently has a bill that aims to prevent the president from imposing tariffs without congressional approval. "Under the Constitution, taxes are supposed to originate in Congress. Congress hasn't been very good at protecting their power. By statute, they gave a lot of powers to the president over the last couple of decades. I think that was a mistake, and I actually have legislation called 'No Taxation Without Representation' to claw back that power," he told International Trade Today at the Capitol. "I think the tariffs will drive up prices, and I think it's a mistake."

Sen. Susan Collins, R-Maine, said she doesn't know if there is anything Congress could do to stop the tariffs on Canada and Mexico "other than persuasion, at this point, because Congress years ago delegated its authority to impose tariffs to the president. In retrospect, I'm not sure that was a wise decision, but they did do so.

"I think we should distinguish among tariffs that are against China, vs. Canada, there's a huge difference."

Sen. Ron Wyden, D-Ore., who didn't support efforts to change Section 232 when he led the Senate Finance Committee, is now supporting a bill (see 2501210061) that would prevent Trump from using IEEPA to hike tariffs. Other approaches, like Section 232 and Section 301, require a deliberative process that takes months. The bill, which also has a House equivalent, has no Republican co-sponsors.

On the floor of the Senate on March 4, he said, "Anyone who voted for Donald Trump because they wanted lower prices and a fairer economy has a right to feel betrayed by his economic sabotage. This bill we’re trying to pass today would rein in some of Trump’s worst impulses and clarify that the laws on the books were never meant to be a blank check for the President to abuse tariffs by using them as a punishment against any country that hurts his feelings. A number of our Republican colleagues have supported this proposal in the past -- because putting a check on the president’s power to land us in trade wars shouldn’t be partisan or controversial." In a statement issued earlier in the day, he also said exporters were already being hurt.

Beijing said it will levy a 15% tariff on U.S. chicken, wheat, corn and cotton, as well as a 10% tariff on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products. China’s finance ministry said the measures, effective March 10, are a direct response to the Trump administration’s decision to use tariffs to address fentanyl trade (see 2502270037).

Ways and Means Trade Subcommittee ranking member Rep. Linda Sanchez, D-Calif., at a press conference on March 4, noted that Trump has also talked about imposing 25% tariffs on imports from Europe. "I mean, you can't get into a trade war with every single country expecting that you're going to come out of that stronger. To try to go to [a] trade war with multiple countries is only going to raise costs for consumers in this country. You've already seen the impacts that it's had on the stock market. Without a cohesive strategy, just [imposing] these broad-based tariffs are not going to do anything other than hurt the United States."

She also led a statement from all the Democrats on the trade subcommittee that said, in part, "Democrats on the Trade Subcommittee are united in rejecting these irresponsible tariffs designed to increase revenue for more tax cuts for the ultra-wealthy. We also call on our Republican colleagues to work with us to reassert Congress’ role in setting strategic, stable trade policies and to invest in the American economy, instead of abdicating their responsibilities to President Trump and Elon Musk.”

Senate Minority Leader Chuck Schumer, in a speech on the Senate floor, also tied the tariff action to the need to find revenue to offset what he called" huge tax breaks for billionaires."

He said, "It means -- according to the CEO of Target, to take one example -- consumers could see higher prices within days. This is not something six months out."

He named gas, produce, cars, cheese, coffee, chocolate, refrigerators, washers, microwaves, laptops, smartphones, clothing, shoes and furniture as goods that will go up in price.

He said he supported Section 301 tariffs on Chinese goods that Trump imposed in his first term, "But the situation we have today is completely different."

Speaker of the House Mike Johnson, R-La., was asked at his press conference if people are right to be concerned that we're at the start of a long and painful trade war. He said no one looks forward to a trade war, but that Trump was ahead of his time in recognizing that free trade only works if it's fair trade.

He said Trump would reset trade relationships with "all these countries around the world that have taken advantage of America," and that Trump will convince countries with high tariffs on our exports "to bring that down by giving them a dose of their own medicine.

"As the President said, just have a little patience with this, let it play out, see how it develops. I think at the end of the day, America's going to be better off."