Less than 36 hours after imposing cleaning fees for America’s biggest trading partner, the Trump administration has already shown that it is ready to compromise by lifting them, at least in part.
On an appearance on Bloomberg TV on Wednesday morning, Commerce Secretary Howard Lutnick said that if Canada and Mexico are deemed to be flowing to the United States, the president will consider giving “some relief.”
“The president has heard offers from Mexico and Canada. He’s thinking he’s going to do something in the middle,” Rutnick said. “He’s thinking about it. We’re talking about it. When I leave here, I’m going to talk about it with him and I think it’s this afternoon or this afternoon.
“And my idea is that it’s going to be somewhere in the middle. So, not 100% of all the products, there’s nothing, because I think Mexico and Canada are doing their best.”
Lutnick said it is seeking to achieve greater compliance with the US-Mexico-Canada Agreement (USMCA), a successor trade agreement to NAFTA established by Trump in 2018.
At the same time, Lutnick said “several categories” could be exempt from a 25% tariff, including AUTO, which is subject to some of the USMCA’s strictest US-made rules.
Lutonic’s proposal that there is room for sunlight for Canada-Mexico talks, repeated what he gave Tuesday afternoon, sending stocks temporarily higher in after-hours trading.
However, the market response to his latest comments has been mitigated by more signs of a slowdown in the US economy. Earlier on Wednesday, the ADP reported that private sector job creation slowed in February, far below the 186,000 jobs added in January, with companies that fell below the 148,000 Dow Jones Consensus estimates adding 77,000 workers.
Education and health services achieved the weakest employment growth last month, but manufacturing, construction, leisure and hospitality showed strength, data show.
And Lutnick’s statement was largely reflected in Trump’s speech to Congress on Tuesday night.
“We’re going to take trillions of dollars and create jobs that we’ve never seen before,” Trump told Congress.
Trump acknowledged that there could be difficulties, especially for the agricultural industry. In particular, they are already facing retaliatory tariffs from China and Canada in response to the tariffs that Trump has placed on those countries. He told the farmers, “There might be a bit of a adjustment period.”
“Taxes are about enriching America again, making America great again, and that’s happening and it’s going to happen pretty quickly,” he said. “There’s a bit of a hindrance, but that’s fine. That’s not that much.”
Media reports say the president is scheduled to speak with Canadian Prime Minister Justin Trudeau on Wednesday, while Mexican President Claudia Sinbaum said he will speak with the president on Thursday.
Companies including car manufacturers, alcohol producers and major retailers such as Target have warned that companies importing goods from Canada and Mexico will have a wide range of impacts across the US economy, increasing consumer prices.
Customs duties are paid by companies imported into the country by US-based companies. These companies can either pass additional costs to customers in the form of higher prices, or absorb tariffs by reducing costs elsewhere, or hit profits.
Uncertainty about Mexico and Canada’s tariffs has come for months after Trump first raised a threat shortly after his election. Last month, Trump said that enacting tariffs on both countries on February 4 would only announce that it would slow down the movement by one month the day before tariffs were collected. This week, Trump said he hadn’t done enough to stop the fentanyl flow in the past month and began collecting tariffs in the middle of the night Tuesday.