Washington: Amid Canadian Prime Minister Justin Trudeau’s vow to retaliate against President Donald Trump’s 'very dumb' tariffs, US Commerce Secretary Howard Lutnick said the country would reach a middle ground with Canada and Mexico, with an announcement expected on Wednesday.

"Now, 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," Lutnick said in an interview on Fox Business' "Kudlow" program.

"So I think he's going to work something out with them. It's not going to be a pause ... but I think he's going to figure out you do more, and I'll meet you in the middle somewhere, and we're going to probably be announcing that tomorrow," he said.

"So somewhere in the middle will likely be the outcome."

Why it’s important
Trump's new 25 per cent tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20 per cent. The move has sparked trade wars that could slam economic growth and lift prices for Americans still smarting from years of high inflation.

Canadian Prime Minister Justin Trudeau told Trump on Tuesday that his tariffs on Canadian imports were "a very dumb thing to do" and said Ottawa was striking back immediately at its closest ally.

Trudeau, who is stepping down at the end of the week, also accused Trump of wanting to ruin the Canadian economy.

Trudeau, speaking hours after Trump launched a trade war against Mexico and Canada, announced immediate 25 per cent tariffs on C$30 billion worth of US imports. If need be, Canada will target another C$125 billion worth in 21 days' time, he said.

"There is absolutely no justification or need whatsoever for these tariffs," Trudeau told reporters, adding that Canada would challenge the U.S. measures at the World Trade Organization and through a U.S.-Mexico-Canada trade agreement already in place.

"Canadians are reasonable and we are polite, but we will not back down from a fight, not when our country and the well-being of everyone in it is at stake," he said.

Trump responded by saying the Canadians retaliatory tariffs would be met with immediate reciprocal tariffs of the same size. Trump has accused Canada of failing to do enough to stem the flow of the deadly fentanyl opioid and its precursor chemicals into the US, an argument Trudeau called "completely bogus, completely unjustified, completely false."

Trudeau's relations with Trump, which have never been warm, deteriorated in recent months after the president repeatedly talked of Canada becoming the 51st US state and mockingly referred to Trudeau as its "governor" rather than prime minister. Trump says he is unhappy with the trilateral US-Mexico-Canada trade deal that he signed in his first term. Trudeau played down the idea of opening talks ahead of a review scheduled for 2026.

"Given that he is choosing to want to ruin the Canadian economy, I don't know whether to bring forward negotiations, given the situation of such bad faith that we're in," said Trudeau, who warned Canadians that tough times were coming. Economists say Canada, which sends 75 per cent of all exports to the United States, will plunge into a recession unless the tariffs are lifted quickly.

Trudeau said Americans would suffer as well, given how tightly the two economies are connected, and he referred to a Wall Street Journal editorial in late January that said Trump would be launching "the dumbest trade war in history" if he went ahead with tariffs.

"It's not in my habit to agree with the Wall Street Journal, but Donald, they point out that even though you're a very smart guy, this is a very dumb thing to do," said Trudeau, who will step down as prime minister after the ruling Liberal Party chooses a new leader on Sunday.