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By Shane Croucher
Senior Editor
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U.S. Commerce Secretary Howard Lutnick said President Donald Trump may announce "relief" on tariffs for Mexico and Canada on Wednesday, in comments made to Bloomberg TV.
Lutnick said the tariffs announced earlier in the week are related to the fentanyl issue. "This is not a trade war. This is a drug war," Lutnick said during the interview, and both Mexico and Canada are "showing us even more ways to try to stop the flow of fentanyl."
"When I leave here, I'm going to go talk about it with him," Lutnick said. "This afternoon we expect to make an announcement and my thinking is it's going to be somewhere in the middle. So not 100 percent of all products and not none. Somewhere in the middle because I think Mexico and Canada are trying their best and let's see where we end up."
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The U.S., Canada and Mexico renegotiated their trading relationship under the first Trump Administration, resulting in the end of NAFTA and the beginning of the USMCA. Any relief from Trump will likely relate to compliance with the USMCA.
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Why It Matters
Trump wants to end the trafficking of fentanyl across the borders. The highly potent synthetic opioid is a major cause of drug deaths in the U.S.
Fentanyl is trafficked by drug gangs across the U.S. borders with Mexico and Canada, primarily by cartels operating in the former. Chinese gangs play a large role in helping to manufacture the fentanyl that ends up in the U.S.
The Trump administration is also using tariffs as a tool to force more favorable trade terms out of its trading partners, arguing that the U.S. is treated unfairly and subject to higher levies and greater restrictions than it puts upon others.
The U.S. president sees tariffs as a way to protect domestic businesses from global competition in the hope that more jobs and investment end up at home, not overseas. Opponents argue that tariffs drive up costs, disrupt supply chains and fuel inflation.
What to Know
"The president is open-minded," Lutnick told Bloomberg. "There are going to be tariffs, let's be clear, but what he's thinking about is which sections of the market that can maybe—maybe—he'll consider giving them relief until we get to, of course, April 2."
The Trump administration is set to introduce "reciprocal tariffs around the world" on April 2, Lutnick said, and these will relate to its goal of greater "fairness" in its trading relationships.
"This is about fentanyl this month," Lutnick said, referring to the 25 percent tariffs Trump put on Mexico and Canada, and the increase to 20 percent on China, on March 4.
"The president is listening to the offers from Mexico and Canada. He's thinking about trying to do something in the middle. He's thinking about it. We're talking about it."
Canadian Prime Minister Justin Trudeau called the tariffs "dumb" and accused the U.S. of having "launched a trade war against Canada, their closest partner and ally, their closest friend."
He said Canada is taking action to tackle fentanyl, and the amount flowing into the U.S. over its border is relatively small. Canada immediately responded with its own tariffs against the U.S., and said more measures were coming.
Mexico's President Claudia Sheinbaum called on Mexicans to gather in Mexico City's main square at noon on Sunday, March 9, to hear how her government would counter the U.S. with its own tariff and non-tariff measures.
What People Are Saying
Trump said in his address to Congress: "Tariffs are about making America rich again and making America great again. And it's happening and it will happen rather quickly. There will be a little disturbance, but we're OK with that."
Trudeau said: "While less than 1 percent of the fentanyl intercepted at the U.S. border comes from Canada, we have worked relentlessly to address this scourge that affects Canadians and Americans alike ... Because of the tariffs imposed by the U.S., Americans will pay more for groceries, gas, and cars, and potentially lose thousands of jobs. Tariffs will disrupt an incredibly successful trading relationship. They will violate the very trade agreement that was negotiated by President Trump in his last term."
Sheinbaum said: "We will always seek a negotiated solution, as we have proposed within the framework of respect for our sovereignty, but the unilateral decision made by the United States affects national and foreign companies operating in our country and affects our peoples."
What Happens Next
Trump may make the call on tariff relief on March 5. It could help ease some of the market fears about a trade war. Markets already improved a little off the back of Lutnick's recent remarks.
However, as Lutnick said—April 2 is coming. And so are more tariffs, this time all over the world, with all the consequences that may bring.
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