Trump defends his trade war. But an ally hints at de-escalation

On the day he launched a trade war, U.S. President Donald Trump doubled down on tariffs in a lengthy speech to Congress and prepared his nation for a period of upheaval.

He did not sound at all like a man looking to de-escalate. But away from the televised stage, a senior member of his team was working the phones, talking de-escalation.

"There'll be a little disturbance," is what Trump told U.S. lawmakers in his prime-time address Tuesday, alluding to jittery markets. "But we're OK with that. There won't be much."  

What's clear is Trump remains committed to tariffs as a principle.

He promised repeatedly to use them to punish unfair trade practices, and also to push manufacturing back to the U.S., something he said carmakers and other major businesses are already doing.

His lines referring to tariffs on Canada and Mexico drew tepid applause, at best. They've also earned a thumbs down from the stock market, amid plunging consumer confidence.

Now Trump's tariff point man says there could be an adjustment on Wednesday.

Commerce Secretary Howard Lutnick made the claim Tuesday after speaking to officials at different levels of Canadian government about finding an off-ramp. Lutnick went public with that possibility in media appearances, saying Trump was considering some sort of compromise in this one specific dispute with Canada and Mexico.

"I think there's going to be a significant announcement tomorrow," Lutnick told CBC News inside the Capitol. "There's been lots of talking," he said, referring to his conversations with Finance Minister Dominic LeBlanc.

He later added that Canada had made an excellent offer to co-operate in stopping fentanyl, and that there was a chance at a compromise with both Canada and Mexico: "I think there's some room .... We'll announce that tomorrow." 

It's not clear how certain this is. A Lutnick phone call with Ontario Premier Doug Ford was described as "tough" in tone by a senior Ontario government source, and Canadian officials, separately, downplayed talk of an imminent deal.

Trump ally links issue to CUSMA review

Lutnick himself was vague on the details. He insisted there would be no pause in tariffs, but perhaps some partial reprieve. He repeated twice, in an interview with Fox Business, that Trump would find a form of compromise with Canada and Mexico: "Somewhere in the middle."

When pressed by Fox to explain what that meant, and whether he was referring to a smaller tariff, Lutnick turned the conversation to a new topic — the Canada-U.S.-Mexico trade agreement (CUSMA).

That agreement must, by law, be renegotiated within a decade sometime after 2025, but it's clear the U.S. wants an accelerated timeline.

Lutnick told Fox that countries that abide by the rules of the trade agreement would be spared tariffs, and went on to list perennial gripes the U.S. has with Canada: mostly closed dairy trade and the Trudeau government's digital services tax.

He also repeated a recent complaint about the GST, suggesting the design of that sales tax might also become an irritant in the renegotiation.

LeBlanc pushed back on the notion that there was some kind of middle ground to be found in the tariff dispute, insisting the existing trade agreement must be respected. 

"We're not interested in some sort of reduction of the tariffs," LeBlanc told CBC News chief correspondent Adrienne Arsenault on Tuesday evening. 

"We want the free trade agreement with the United States and Mexico respected, and we'll continue to work with the government of the United States on issues once the tariffs are lifted and the respect of the free trade agreement is returned," he added. 

A senior Ontario government source confirmed that the broader continental trade pact was part of the conversation; that senior provincial official was in the room with Ford and said the call ended with a reference to CUSMA, known in the U.S. as USMCA.

"Lutnick was vague but seemed to be pointing to USMCA as an off-ramp," said the source, who requested anonymity to discuss sensitive talks. "No specific commitments or next steps [were made]."

The Ford-Lutnick call was first reported in the Globe and Mail. 

The source told CBC News that Lutnick was clearly trying to get Canadians to de-escalate, as Canada implements counter-tariffs and Ford has made dramatic threats, including putting an export tax on electricity.

The continent-wide tariff war has swiftly roiled American markets and risks turning into a political headache for Trump.

Earlier Tuesday, American news media were reporting the souring economic mood. And Democrats who have been stumbling around in search of a clear message since the election are testing one on tariffs.

Political blowback starts in the U.S.

The Democratic response to Trump's speech was delivered by a senator from Michigan, Elissa Slotkin, the U.S. state that risks being most heavily battered by tariffs on Canada.

She uttered the party's emerging message to voters: This is a transfer of wealth from regular Americans to the richest Americans.

President Trump wants tax cuts for billionaires, and to pay for it, he'll collect tariffs on the goods ordinary people buy, is how that argument goes.

Chuck Schumer, the Democrats' leader in the Senate, also made that case in a speech in the Senate Tuesday, saying tariffs are fine for certain purposes, but not for this.

"The situation today is completely different. It makes no sense to start a trade war with America's closest trade partners," Schumer said. "The casualty of that trade war will be consumers and American households." 

He ridiculed the idea that fentanyl from Canada was the real impetus for these tariffs. To impose the tariffs, Trump declared fentanyl deaths a national emergency and used it to invoke the International Emergency Economic Powers Act of 1977.

WATCH | How Canada is responding to Trump's tariffs on Canadian goods: 

Trump shows little sign of letting up on tariffs in speech to Congress

1 day ago

Duration 1:17

U.S. President Donald Trump defended his tariffs against other countries, including Canada, during a speech in the U.S. Capitol on Tuesday. He said tariffs are 'about protecting the soul' of his country.

Lawyers for multinational companies are preparing to argue in court that Trump abused the law and that fentanyl deaths were a false pretext.

They can point to the president's own words that he's mostly tightened the border already, and the words of his aides praising Canada and Mexico's actions to halt the cross-border flow of fentanyl.

Democrats have also drafted a motion aimed at forcing a vote in Congress to knock down the tariffs on Canada and Mexico — which is a long shot.

But if Lutnick is right, all of this might be moot by Wednesday. And the countries might move on to other irritants: Trump's litany of other tariff threats, and a review of CUSMA.

Republicans expressed confidence that Trump had a secret strategy. Or rather, they hoped so. Republican Senate Majority Leader John Thune told CNN he's worried about the economic effect of these tariffs.

"I think the president is looking at this as a means to an end. I don't think it's the end itself," Thune said. 

"I certainly hope it isn't."