WASHINGTON — A day into Donald Trump’s North American trade war, the U.S. president remained adamant that tariffs would benefit America even as a key member of his team has floated that a compromise could materialize Wednesday.
Trump addressed a joint session of Congress Tuesday night, for the first time since he returned to office in January, by making a case for his massive tariff agenda.
“We have been ripped off for decades by nearly every country on Earth and we will not let that happen any longer,” Trump told lawmakers in Washington.
The president’s executive order hitting Canada and Mexico with 25 per cent across-the-board tariffs, with a lower 10 per cent levy on Canadian energy, took effect Tuesday.
Prime Minister Justin Trudeau called the continental trade war “dumb” and said Canada was forced to push back. He framed Trump’s ultimate tariff goal as “a total collapse of the Canadian economy, because that will make it easier to annex us.”
Ottawa introduced immediate 25 per cent retaliatory tariffs on $30 billion worth of American products, which will expand to cover another $125 billion in U.S. goods in 21 days.
Mexican President Claudia Sheinbaum said her government would announce duties on targeted products and other measures Sunday. She said “there is no motive or reason, nor justification that supports this decision that will affect our people and our nations.”
The tariffs caused immediate market turbulence as many business and industry groups condemned devastating duties against America’s closest neighbours.
Clips of Ontario Premier Doug Ford threatening to cut off electricity to the United States played repeatedly on U.S. TV stations. Images and video of American liquor being pulled off the shelves in Canadian stores signalled what could come if Trump continued his trade war path.
Minutes after the U.S. stock market closed, following a second day of sharp decline, U.S. Secretary of Commerce Howard Lutnick said there could be a ramp off the devastating duties. Lutnick told Fox Business that the government was looking to “work something out” in a deal that could be announced on Wednesday.
“It’s not going to be a pause. None of that pause stuff,” he said. “Somewhere in the middle will likely be the outcome.”
Finance Minister Dominic LeBlanc spoke with Lutnick on Tuesday but Foreign Affairs Minister Mélanie Joly told CBC News she had not heard about any “middle” deal. Joly was to speak with U.S. Secretary of State Marco Rubio on Wednesday.
It was unclear what Trump would consider as a concession.
Lutnick tied the deal to the Canada-U.S.-Mexico agreement, which was negotiated under the first Trump administration to replace the North American Free Trade Agreement.
Trump has previously connected duties to wide-ranging complaints from defence spending to trade deficits. Trump has repeatedly claimed he wants to make Canada a U.S. state.
Lutnick’s comments give additional credence to Canadian officials’ supposition that tariffs are not actually connected to the flow of deadly fentanyl over the border — the legal backing Trump is using for the duties. U.S Customs and Border Protection data shows the volume of drugs crossing from Canada into the United States is minuscule compared to Mexico.
“We think it’s a bogus argument,” Joly said.
Tuesday was the first big test of how the markets would react to Trump’s massive trade agenda — and it could signal how the president moves forward in his plan to upend global trade.
Trump also ordered 25 per cent tariffs on all steel and aluminum imports into the United States on March 12, which the White House has confirmed would stack on top of the other duties imposed on Canada.
Trump signed an executive order to implement “reciprocal tariffs” starting April 2. Other tariff targets include automobiles, copper, lumber and agricultural products.
— With files from The Associated Press
This report by The Canadian Press was first published March 5, 2025.
Kelly Geraldine Malone, The Canadian Press
