U.S. President Donald Trump’s nominee for commerce secretary on Wednesday defended the use of tariffs to create “fairness” and denied they will be inflationary, while also hinting at a looming fight with Canada over dairy market access.
Billionaire financier Howard Lutnick told his U.S. Senate confirmation hearing that the 25 per cent tariffs Trump has vowed to impose on Canada and Mexico starting Saturday are meant purely to compel border security improvements from both countries, particularly to crack down on fentanyl trafficking.
“If we are your biggest trading partner, show us respect: shut your border and end fentanyl coming into this country,” Lutnick said.
“It’s not a tariff, per se, it is an action of domestic policy. … As far as I know, they are acting swiftly, and if they execute it there will be no tariff.”
Although the amount of fentanyl seized at the northern U.S. border is a small fraction of what authorities have encountered coming from Mexico, those northern seizures have risen more than 200 per cent over the past two years, according to U.S. Customs and Border Patrol data.
Ottawa has rolled out a border security plan that includes additional investments in enforcement and detection of drug and human smuggling. New technologies and equipment, including Black Hawk helicopters, are among those investments.
Public Safety Minister David McGuinty said Canada should take Lutnick’s comments about border security “seriously” and at “face value,” but said he’s confident in the work the government has done to address those concerns.
“Canada’s border is strong, and we’re making it even stronger,” he told reporters in Ottawa, pointing to a number of police actions that have disrupted fentanyl labs, money laundering and human smuggling operations within Canada in recent weeks.
“When the new administration suggests that we need to bear down on this question of fentanyl, we don’t disagree. Where we really want to see progress is in cooperation, because we know the best way to tackle this crisis is to tackle it together.”
Those actions and arguments do not appear to have swayed Trump, who has pivoted to attacking the U.S. trade deficit with Canada — driven primarily by cheap oil imports — and imbalances in defence spending.
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The White House on Tuesday said the duties on Canada and Mexico are “still on the books” to begin on Feb. 1.
Those tariffs, Lutnick said, will be separate from the universal tariffs he and Trump want to levy on all countries.
Trump has ordered his administration to study the potential impacts of those broader tariffs and report back by April 1.
Asked if he can commit to Americans that prices won’t go up due to tariffs, Lutnick said he would wait for those studies to be concluded, but said his tariff approach would lead to a “much, much better” American economy.
“A particular product’s price may go up, but all of them? This is not inflationary,” he said. “It is just nonsense that tariffs cause inflation. It is nonsense.”
The Bank of Canada released an analysis Wednesday that found universal tariffs on foreign imports to the U.S. “increase the prices U.S. consumers pay for imported goods, leading to higher inflation.”
The prospect of higher prices could also affect the U.S. Federal Reserve’s willingness to continue cutting interest rates, according to American economists. The central bank held its key interest rate in place Wednesday, while its Canadian counterpart ordered another small cut.
Lutnick said he prefers tariffing entire countries, rather than specific products, to “create reciprocity, fairness and respect” and return manufacturing bases to the U.S.
“My way of thinking, and I’ve discussed this with the president, is country by country, macro. Let America make it more fair,” Lutnick said.
“We are treated horribly by the global trading environment. They all have higher tariffs, non-tariff trade barriers and subsidies. They treat us poorly.”
Canada treats U.S. dairy farmers ‘horribly,’ Lutnick says
Trump’s executive order on trade policy last week also launched consultations and studies into the impacts of the Canada-United States-Mexico Agreement (CUSMA), which replaced NAFTA during Trump’s first term, on American businesses — particularly the agricultural sector.
The free trade pact is up for review in 2026, and Lutnick hinted U.S. access to Canada’s dairy market — a sore spot during the initial CUSMA negotiations — could be in the administration’s crosshairs again.
“Canada … treats our dairy farmers horribly,” he told Wisconsin Sen. Tammy Baldwin. “That’s got to end.
“I’m going to work hard to make sure, as an example for your dairy farmers, they do much, much better in Canada than they’ve ever done before.”
The U.S. managed to secure new measures for improved access to Canada’s dairy market under CUSMA, including lower tariffs for certain American products.
However, the U.S. has since launched multiple disputes claiming Canada is intentionally bottlenecking those U.S. imports through tariff rate quotas, which put limits on how many exporters qualify for the cheaper duties.
Canada has said it’s necessary to limit U.S. exports to protect domestic dairy producers through the country’s supply management system, which has been criticized by international trading partners.
After a USMCA dispute panel sided with Canada in the latest tiff over market access in 2023, the U.S. Dairy Export Council said the decision “weakens (CUSMA’s) value to the U.S. dairy industry.”
Trump has openly mused that “we don’t need” Canadian dairy products and other key imports like automobiles, lumber and even oil and gas, claiming the U.S. can produce enough of those goods on its own.
Lutnick repeatedly stressed the need for North American manufacturing to be re-centered to the U.S. during his confirmation hearing Wednesday, and pointed to the auto industry as an example.
“We need to grow domestic manufacturing,” he said.
“The car manufacturing went to Canada, it went to Mexico. It is important that that come back to Michigan and come back to Ohio and come back to the great states of America that can build. So I think a thoughtful tariff policy that drives domestic manufacturing, I think is fundamental to American workers.”
