Trump may meet Canada “in the middle” on tariffs: Lutnick

U.S. President Donald Trump will “probably” announce a compromise with Canada (and Mexico) on Wednesday (March 5), which potentially could scale back his new 25 per cent tariff policy, Commerce Secretary Howard Lutnick said Tuesday (March 4).

The comments, made to “Fox Business,” came after the U.S. stock market closed for a second day of sharp declines. While the Cabinet secretary did not state what Trump will do, he suggested the U.S. president would be open to meeting Canada and Mexico “in the middle.”

He also appeared to foreclose on the possibility that Trump would lift the tariffs entirely.

The hints come after the Trump administration, on Tuesday, imposed sweeping 25 per cent tariffs on Canadian (and Mexican) imports – and a 10 per cent levy on Canadian energy exports – after a 30-day pause.

It appears Trump is using tariffs as a negotiating tool, based on allegations that Canada and Mexico were failing to stop the flow of fentanyl into the U.S.

READ MORE: Trump's 25% tariffs spark recession fears; travel industry pivots to limit impact

“Both the Mexicans and the Canadians are on the phone with me all day today, trying to show that they’ll do better,” Lutnick said Tuesday afternoon “And the President is listening because, you know, he’s very, very fair and very reasonable. So I think he’s going to work something out with them.”

Prime Minister Justin Trudeau, however, has pointed out that less than one per cent of the fentanyl intercepted at the U.S. border comes from Canada.

“We have worked relentlessly to address this scourge that affects Canadians and Americans alike,” he said in a statement earlier this week.

Trudeau says Trump's tariffs will harm both economies and the Canadian government will now hit the U.S. with retaliatory 25 per cent tariffs on $155 billion worth of American goods coming into Canada.

A “dumb” trade war

At a press conference yesterday, Trudeau claimed the aim of Trump’s “dumb” trade war is to usher in the “complete collapse” of the Canadian economy and make it easier for the United States to annex Canada.

Trudeau, who will step down as prime minister after the ruling Liberal party chooses a new leader on Sunday, said Canada would remain defiant against U.S. aggression.

READ MORE: “I’m absolutely concerned”: Travel advisors, execs respond to trade war; some cancellations reported

“We’ve been in tough spots before … but we have not only survived, we have emerged stronger than ever, because when it comes to defending our great nation, there is no price we all aren’t willing to pay, and today is no different,” he said.

There are, however, serious concerns about how Canada’s economy will turn out if tariffs continue. According to Desjardins’ deputy chief economist, Randall Bartlett, Canadians can expect to enter a recession by the middle of this year if this continues. 

Impact on travel

Canada’s economic conditions affect disposable income and consumer spending, which, if severe enough, can have a negative impact on the travel industry.

Ever since Trump’s tariff announcements, WestJet’s sales from Canada into the U.S. have “dropped very significantly,” company CEO, Alexis von Hoensbroech, told reporters last month.

Air Canada is also monitoring the market. During an earnings call last month, Executive Vice President of Revenue and Network Planning and President of Cargo Mark Galardo said the airline would reduce capacity on select routes to Florida, Las Vegas, and Arizona starting in March, citing the ongoing Canada-U.S. tariff dispute and the weak dollar.

READ MORE: “The time to act is now”: CATO urges travel industry to speak out against Trump-imposed tariffs

Air Transat and Porter Airlines have also reduced their U.S. capacity, PAX confirmed last week. However, both airlines are calling the adjustments normal, asserting that they’re still seeing demand for U.S. destinations from Canada.

The Association of Canadian Travel Agencies and Travel Advisors (ACTA) issued a statement yesterday, saying it is "extremely concerned" about the situation.

"If these tariffs are not short-lived the direct impact on Canadians' purchasing power will significantly harm travel advisors as their clients delay or cancel travel plans due to financial constraints," ACTA said.

Both ACTA and the Canadian Association of Tour Operators (CATO) are calling on travel and tourism professionals to take action.

Laurie Keith, CEO at Ontario-based Boutique Travel Services, believes the ripple effect of Trump’s tariffs will “definitely have an impact on the economy, including the travel industry.”

“We are already witnessing billions of dollars in cancelled trips by Canadians to south of the border destinations,” Keith told PAX on Tuesday. “For now, our clients are seeking alternative destinations, but I feel that as consumer confidence begins to dwindle, job losses start to come into effect, and the cost of living increases due to these tariffs, we will be facing another arduous time as a nation.”

Meanwhile, amid calls to “buy Canadian,” along with requests from politicians to cancel trips to the U.S., and the weak loonie, many Canadians rethinking where they should spend their travel budgets.

A Leger poll released last month of 1,553 Canadian adults showed that nearly half (48 per cent) are less likely to visit the United States amid shifting Canada-U.S. relations.

In contrast, just one in ten (10 per cent) say they are more likely to travel south, while 43 per cent report no change in their U.S. travel intentions.

Speaking to PAX yesterday, Reese Morash of Halifax-based agency TravelBug Travel Group said consumers are “doing their research” to figure out which travel companies are U.S.-owned, especially when it comes to cruises.

He said his agency is in the midst of shifting people to Viking “as they have no American affiliation.”

But in most cases, the impact isn’t immediate due to the way travel is booked and processed.

“The majority of our bookings are always two years out, so currently we have cruises and some land groups running this year, but because they were booked two years ago, they are fully paid and will still be happening – unless clients have insurance to protect them if they cancel,” he said.

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