The United States is poised to impose a two-stage tariff plan on Canada and Mexico, starting with initial penalties within days and potentially escalating to broader tariffs this spring. The plan, outlined by President Trump's nominee for commerce secretary, Howard Lutnick, during his Senate confirmation hearing, targets Canada's role in the fentanyl crisis and aims to protect U.S. dairy and auto manufacturing industries. While Canada and Mexico have taken steps to address the concerns, U.S. officials remain wary. Canadian officials are scrambling to persuade President Trump to back down from the threat, but face an uphill battle.
The U.S. is threatening a two-stage tariff plan that could see Canada and Mexico slapped with initial trade penalties within days, followed by broader penalties this spring. Details of this plan emerged Wednesday at the U.S. Senate confirmation hearing for Howard Lutnick, President Donald Trump's nominee for commerce secretary. Lutnick outlined this two-step approach in response to Michigan Sen.
Gary Peters, who expressed concerns about the potential impact of a cross-border trade war on his state. Lutnick explained that Phase 1 is essentially an emergency action to address the fentanyl crisis, stating, 'You know that the labs in Canada are run by Mexican cartels,' Lutnick replied. 'Respect America. If we are your biggest trading partner, show us the respect. Shut your border. And end fentanyl coming into this country.' While only about one percent of illegal drugs entering the U.S. come from its northern border, U.S. officials are worried about the growing production of drugs in Canada and the perceived failure of Canadian law enforcement to crack down on money laundering activities by international criminal organizations there. Lutnick noted that both Canada and Mexico appear to be taking some action, with Canada announcing several measures on the border, migration, and crime. Canadian officials, however, are bracing for the possibility that Trump will make good on his threat to impose tariffs on February 1st, potentially upending decades of North American free trade. They have been reaching out to various American counterparts in a desperate attempt to dissuade Trump, but have received little reassurance. One reply they've repeatedly heard: they need to personally convince Trump with direct evidence of the security measures Canada has taken. Canadian officials have been compiling video footage to illustrate recent efforts to deter illicit trafficking across the border and publishing press releases on border-area arrests. Lutnick stated, 'I know they are acting swiftly,' he said of Mexico and Canada. 'And if they execute, there will be no tariff. And if they don't, then there will be.' White House press secretary Karoline Leavitt, in her first-ever briefing, stated that based on her conversation with President Trump, his plan to impose a 25 percent tariff on Canada on February 1st is 'still on the books.' But the potential for further tariffs looms. Lutnick made clear that the U.S. is considering a broad range of tariff options, which will be informed by a study the president has commissioned. Lutnick also indicated at his confirmation hearing that there will be further actions against Canada in the spring, specifically mentioning dairy and auto manufacturing. He told Wisconsin Democrat Tammy Baldwin that he wants more U.S. dairy exported to Canada, stating, 'Canada ... treats our dairy farmers horribly. That's got to end.' He also told Peters, the Michigan Democrat, that his goal is to bring auto manufacturing jobs back from other North American countries, saying, 'The car manufacturing went to Canada, it went to Mexico. It's important that that come back to Michigan, come back to Ohio.' It appears that, even if Canada and Mexico avoid the immediate tariff threat for February 1st, the issue will continue to cast a shadow for months to come
Trade TARIFFS CANADA MEXICO USA TRADE WAR FENTANYL AUTOMOTIVE INDUSTRY DAIRY NORTH AMERICAN FREE TRADE AGREEMENT
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