President Donald Trump insisted tariffs will strengthen America’s economy during a speech to Congress on Tuesday evening, even as his commerce secretary suggested a deal could ease new tariffs on Canadian and Mexican goods.
Trump’s aggressive trade measures, including 25% tariffs on most Canadian and Mexican imports and a 10% levy on Canadian energy, took effect on Tuesday.
The move triggered immediate retaliation from both countries and sent shockwaves through the financial markets.
“We’ve been ripped off for decades by nearly every country on Earth, and we won’t let that happen any longer,” Trump told Congress in his first address since beginning his second term in January.
Prime Minister Justin Trudeau slammed the tariffs as “dumb” and warned Trump’s goal could be “a total collapse of the Canadian economy.”
Canada responded with 25% tariffs on $30 billion of US goods, set to expand to $125 billion in three weeks.
Mexico pledged to announce its own countermeasures with President Claudia Sheinbaum calling Trump’s decision unjustified and harmful.
Markets tumbled for a second straight day, reflecting business fears over the trade war.
As trading closed on Tuesday, US Commerce Secretary Howard Lutnick hinted at a potential compromise.
“We’re looking to work something out,” Lutnick told Fox Business, suggesting a deal might come on Wednesday.
“It’s not a pause. Somewhere in the middle will likely be the outcome.”
Finance Minister Dominic LeBlanc spoke with Lutnick on Tuesday, but Foreign Affairs Minister Melanie Joly said she was unaware of any pending deal.
Joly is scheduled to discuss the dispute on Wednesday with US Secretary of State Marco Rubio.
Trump has long linked tariffs to complaints ranging from trade deficits to demands for higher NATO defence spending and suggesting Canada become the fifty-first state.
Lutnick tied the potential deal to the Canada-US-Mexico trade agreement, which replaced NAFTA in 2020.
Canadian officials dismissed Trump’s claim that tariffs target fentanyl trafficking, pointing out that US data shows minimal drug flow from Canada compared to Mexico.
“We think it’s a bogus argument,” said Joly.
The tariffs sparked dramatic reactions, including Ontario Premier Doug Ford’s threat to halt electricity exports to the US, which aired repeatedly on American news networks such as CNN.
Videos of Canadian stores removing US made products also circulated widely.
Tuesday’s market slump marked the first major test of Trump’s trade strategy.
Earlier this month, he added 25% tariffs on foreign steel and aluminum, with plans for more tariffs on autos, lumber, and farm goods starting April 2.
As tensions escalate, Lutnick’s comments offer hope for a negotiated solution, though Trudeau’s government remains ready to fight in this trade war.