‘President is very, very fair’: US hints at tariff cuts on Canada, Mexico - How the deal could play out

US Commerce Secretary Howard Lutnick has said that the United States could soon engage in talks with Canada and Mexico to reach a deal with the countries on reaching a mid-point over tariffs and roll some of them back, applauding Donald Trump for being ‘fair’ and ‘reasonable’.

Speaking to Fox Business, Lutnick said that Trump is considering reaching an agreement with Canada and Mexico but pointed out that both countries needed to “do more” for a deal to materialise.

“He's really looking carefully at that trying to figure out if there is a way in there that he can come in the middle, where he can give the Canadians and Mexicans something, but they have to got do more,” he said.

Lutnick revealed that he had a phone call with representatives of both Mexico and Canada who said they would do better. The Commerce Secretary said that Trump was listening as he was “fair and reasonable”.

“Both the Mexicans and the Canadians were on the phone with me all day today trying to show that they'll do better, and the president is listening because you know he's very, very fair and very reasonable,” Lutnick said.

“So I think he's going to work something out with them,” he added.

Biggest trading partners retaliate

Mexico and Canada, two of the biggest trading partners of the US, have imposed tariffs following Donald Trump's decision to go ahead with levies on the neighbours that came into effect on Tuesday.

Trump imposed a a 25 per cent tariff on most goods from Mexico and Canada and brought into effect an increase in duties on Chinese imports.

Canadian Prime Minister Justin Trudeau described the tariffs as “a very dumb thing to do” and retaliated with 25 per cent tariffs on C$30 billion ($20.7 billion) worth of US imports, including orange juice, peanut butter, wine, spirits, beer, coffee, appliances and motorcycles.

Mexican President Claudia Sheinbaum vowed retaliation but did not share details. She said they would be out on Sunday.

China responded immediately, announcing additional tariffs of 10 per cent to 15 per cent on certain US imports from March 10.

Economic implications

One of the biggest implications of Trump's tariffs on US goods is likely to be the increase in day-to-day item prices. Items like electronics, clothing, household goods, and groceries— most of which are imported from either of the three countries— are expected to increase.

Companies have also sounded the possibility of rising costs, signalling that they may pass the losses on to the consumers.

The automotive sector, heavily dependent on cross-border trade, is another area likely to be disrupted.

As per a report by Reuters, Trump's move could upend nearly $2.2 trillion in annual trade.

Target CEO Brian Cornell told CNBC that his company would increase prices “over the next couple of days” on some seasonal grocery products such as avocados from Mexico. Electronics retailer Best Buy CEO Corie Barry also warned of potential higher prices, with China and Mexico remaining the top sources of products sold by the company.

How the deal could play out

The deal could see the two countries reaching a middle ground with the US. Here is how the deal could play out.

Reaching a middle ground

President Donald Trump says a primary reason for his new tariffs against Mexico and Canada is what he calls a “national emergency” caused by fentanyl flowing across the country’s borders.

“They've got to end fentanyl death. You can't just say it's okay that people can die. That is just not a thing,” Lutnick said, reiterating US' demands.

If that happens, Lutnick signalled that Trump might agree to reach a deal with rolling back the tariffs.

“It's not gonna be a pause. None of that pause stuff. But I think he's going to figure out, you do more, and I'll meet you in the middle someway,” he said.

Announcement likely tomorrow

The President is likely to make an announcement tomorrow regarding the talks.

“We're going to probably be announcing that tomorrow. So somewhere in the middle will likely be the outcome — the president moving with the Canadians and Mexicans but not all the way,” Lutnick said.

“If you respect us as your best trading partner, end it… You have got to end fentanyl. And the way we're going to describe fentanyl is very simple — autopsied American guts. It's got to end,” he added.

Trump said the tariff increases were in response to both countries not doing enough to curb the flow of illegal immigration and illicit drugs from Canada and Mexico's shared borders with the US.

(With inputs from Reuters)