Canada and Mexico could avoid steep tariffs if they take swift action to curb the flow of fentanyl across their borders, according to Howard Lutnick, President Donald Trump’s nominee for Commerce Secretary.
Speaking at his US Senate confirmation hearing on Wednesday, Lutnick outlined his vision for trade under the Trump administration, advocating for country-by-country tariffs to restore what he called “reciprocity” in America’s global trading relationships. He also pledged to implement tougher restrictions on China’s access to advanced US technology, including artificial intelligence (AI) semiconductors.
Tariffs as leverage against Canada and Mexico
Lutnick emphasised that Trump’s plan to impose a 25% tariff on Canadian and Mexican goods—set to take effect on Saturday—was designed to pressure both countries into taking action against fentanyl trafficking.
“This is a separate tariff to create action from Mexico and action from Canada,” Lutnick stated. “And as far as I know, they are acting swiftly, and if they execute it, there will be no tariff.”
The remarks were met with a measured response from Canadian Foreign Minister Mélanie Joly, who was in Washington to discuss trade relations.
“Lutnick’s comments regarding the fact that we were addressing the border issue and fentanyl were positive,” she said. However, she added that Canada would retaliate with its own trade measures if Trump followed through on his tariff threats.
Push for trade ‘reciprocity’ and universal tariffs
Throughout the hearing, Lutnick repeatedly stressed the need for a new approach to global trade, echoing Trump’s push for a universal 10% tariff on all US imports.
“We are treated horribly by the global trading environment,” he said. “They all have higher tariffs, non-tariff trade barriers, and subsidies. They treat us poorly. We need to be treated better. We need to be treated with respect, and we can use tariffs to create reciprocity, fairness, and respect.”
Lutnick’s stance is in line with Trump’s broader trade agenda, which has included criticism of the European Union’s higher auto tariffs and a push to eliminate a $7,500 tax credit for leased foreign-made electric vehicles.
Oversight of a vast agency
As Commerce Secretary, Lutnick would oversee a department with 47,000 employees responsible for export controls, trade enforcement, weather forecasting, fisheries, and economic data. Trump has also indicated that Lutnick will take the lead on trade policy, working closely with the US Trade Representative’s office.
Lutnick assured lawmakers that he would step down from his roles at BGC Group, Cantor Fitzgerald, and other firms, and sell all of his holdings to prevent conflicts of interest.
Tougher restrictions on China’s AI and semiconductor access
One of the key issues raised during the hearing was how the US plans to maintain its leadership in artificial intelligence, particularly in light of recent developments in China. Senators pressed Lutnick on how he would counter the rise of DeepSeek, a Chinese AI startup that has developed a powerful, low-cost generative AI model.
Lutnick accused China of misappropriating US technology to gain an unfair advantage.
“They stole things. They broke in. They’ve taken our IP,” he said. “It’s got to end, and I’m going to be rigorous in our pursuit of restrictions and enforcing those restrictions to keep us in the lead, because we must stay in the lead.”
He also expressed support for the $52.7 billion CHIPS and Science Act, passed under former President Joe Biden to boost US semiconductor manufacturing. However, he signalled that the programme would be reviewed.
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Uncertainty over CHIPS act grants and steel tariffs
Lutnick declined to commit to honouring CHIPS and Science Act grants that have already been approved, stating, “I want to read them, analyse them, and understand them.”
His cautious approach follows Trump’s recent order to freeze hundreds of billions of dollars in federal grants, loans, and subsidies, though a federal judge temporarily blocked the move.
Trump has also pledged to raise tariffs on Chinese semiconductors and pharmaceuticals, while expanding steel tariffs. Lutnick suggested that the steel tariffs should be simplified, stating, “I’m a more simple view of tariffs sort of guy, and the president is of like mind.”
Tensions rise ahead of Trump’s tariff deadline
With Trump’s deadline for Canadian and Mexican tariffs looming, trade tensions between the US and its key North American partners are escalating. While Canada and Mexico are making efforts to address US concerns over fentanyl, it remains to be seen whether their actions will be sufficient to avert the tariffs.
For now, Lutnick’s confirmation as Commerce Secretary is expected to proceed, setting the stage for an aggressive trade policy under Trump’s leadership.
