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CNN International: Canada, Mexico, China to Retaliate on Tariffs; Zelenskyy's Regret as U.S. Pauses Ukraine Aid; Trump's Speech to Congress; Trump to Address Congress Amid Trade War; Panama Canal Deal. Aired 6-7p ET

Aired March 04, 2025 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[18:00:00]

JIM SCIUTTO, CNN ANCHOR: Hello and welcome to our viewers joining us from all over the world. I'm Jim Sciutto in Washington.

And we're following three major developing stories this hour. President Trump is set to address a joint session of Congress in just about three hours. He is expected to make the case for his sweeping domestic and foreign policy plans in his first speech to Congress since retaking the White House.

Ukraine's President Volodymyr Zelenskyy delivered the Trump administration an expression of regret over Friday's fracas in the Oval Office, though he urged what he called respectful dialogue. It came as the U.S. government announced a pause on military aid to Ukraine, aid that we should note is already approved by the U.S. Congress, which U.S. and Ukrainian officials tell me has the potential for serious consequences on the battlefield.

And the White House pressing ahead with steep tariffs on Canada, Mexico, and China. The commerce secretary is hinting at the possibility of a compromise as early as Wednesday. My exclusive interview with the foreign minister of Canada, Melanie Joly, coming up right up on CNN Newsroom.

(BEGIN VIDEOTAPE)

MELANIE JOLY, CANADIAN FOREIGN MINISTER: Canadians are more united than ever. And we will be united and we will fight back and we will win.

(END VIDEO CLIP)

SCIUTTO: We begin with President Donald Trump imposing 25 percent tariffs on goods from U.S. allies and neighbors, Canada and Mexico. He also doubled the tariff on all Chinese imports to 20 percent from 10 percent. Those duties sit atop existing tariffs on hundreds of billions of dollars in Chinese goods.

Those three nations collectively shipped 1.4 trillion worth of goods to the U.S. last year, accounting for more than 40 percent of all U.S. imports. President Trump says on social media, quote, "If companies move to the United States, there are no tariffs." Canadian Prime Minister Justin Trudeau struck back today implementing 25 percent retaliatory tariffs against $100 billion worth of U.S. goods. He condemned the moves by the White House and had this message for the American people.

(BEGIN VIDEO CLIP)

JUSTIN TRUDEAU, CANADIAN PRIME MINISTER: Let me be crystal clear, there is absolutely no justification or need whatsoever for these tariffs today. Now, the legal pretext your government is using to bring in these tariffs is that Canada is apparently unwilling to help in the fight against illegal fentanyl. Well, that is totally false.

(END VIDEO CLIP)

SCIUTTO: Prime Minister Trudeau is right about that. Based on U.S. government data, Canada is not a major hub for shipping drugs such as fentanyl into the United States. The Canadian leader says the U.S. president has ulterior and quite alarming motives.

(BEGIN VIDEO CLIP)

TRUDEAU: The one thing he has said repeatedly that what he wants is to see a total collapse of the Canadian economy, because that'll make it easier to annex us, is the second half of his thought. Now, first of all, that's never going to happen. We will never be the 51st state.

(END VIDEO CLIP)

SCIUTTO: In response, President Trump said, please explain to Governor Trudeau of Canada, of course he's the prime minister, not the governor, that when he puts a retaliatory tariff on the U.S., our reciprocal tariff will immediately increase by a like amount, exclamation point.

U.S. Commerce Secretary Howard Lutnick says the Trump administration could announce a pathway for tariff relief as soon as tomorrow.

(BEGIN VIDEO CLIP)

HOWARD LUTNICK, U.S. COMMERCE SECRETARY: 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's listening, because you know he's very, very fair, and very reasonable. So, I think he's going to work something out with them. It's not going to be a pause, none of that pause stuff, but I think he's going to figure out, you do more, and I'll meet you in the middle some way, and we're going to probably be announcing that tomorrow.

(END VIDEO CLIP)

SCIUTTO: That's not how Canadian officials are seeing this. Earlier today, before those comments, I spoke with Canadian Foreign Minister Melanie Joly.

(BEGIN VIDEOTAPE)

SCIUTTO: Madam Foreign Minister, thanks so much for joining.

MELANIE JOLY, CANADIAN FOREIGN MINISTER: It's a pleasure, Jim. Thank you.

SCIUTTO: When we spoke in January about the possibility of Trump imposing tariffs on Canada, you said that if he does, the U.S. and Canada will be in a trade war. Are the two nations now in a trade war?

[18:05:00]

JOLY: Yes, we are. And this is not because of our own making. Canada did not want to start this. But unfortunately, well, we've been working on making sure that we save lives together, that we address the fentanyl issue. Well, the president of the United States decided to launch a trade war against its biggest trading partner, against its biggest ally and its best neighbor.

And we did nothing wrong. We never -- we think that these are unjustified tariffs. And at the end of the day, what is really sad is for all of those of us that are watching right now, well, this will cost American jobs. This will cost more at the pump for Americans, and this will cost more for Americans also at the grocery store.

And this is really, really unfortunate. And we think this is a extremely bad decision on the part of President Trump. And we call on the American people to make sure that they talk to their lawmakers, to their governors, their senators, their House representative, to make sure that they hear that they don't agree with that decision by the Trump administration.

Prime Minister Trudeau said earlier today that he fears that Trump's intent here, and I'm quoting, "is to collapse the Canadian economy to make it easier to annex." Do you share that view?

JOLY: I do. I do. I think that when President Trump talks, we have to listen. And he's been talking about this rhetoric of the 51st state now for more than two months. He said that he would use his economic power to try to annex Canada.

And through my different dealings with the Trump administration, every time I've been asking what do they exactly want, the answer is not very clear. And so, based on that, we have to take President Trump's words and we have to just come to the conclusion that that's what he's trying to do, to his biggest trading partner and friend.

SCIUTTO: And treaty ally. I mean, that's truly remarkable. I know -- I've spent a lot of time in Canada. I know the Canadian people are a proud people and proud of their country. How does Canada react if that is actually President Trump's intent to collapse the economy?

JOLY: Well, first and foremost, Canadians are more united than ever. And we will be united, and we will fight back, and we will win. And that's why today we announced $155 billion worth of tariffs against American merchandise coming to Canada. We're targeting products from the U.S. that are linked to our friends within the Republican Party that can make pressure to the Trump administration, and we don't want to do this. We want this to be over.

But at the same time, we are under an existential threat, Jim. And so, of course, we are retaliating. And also, I must say President Trump and his administration has -- have together threatened Canada, not only on the economic front, but on many other fronts. And so, of course, we will fight back.

And, you know, Canadians are people that abide by the rules, but we're courageous people, and we stand strong on our principles and values. And that is at the core of who we are as a country. And that's why I'm convinced that the Canadian people are right now fully behind their government, as we speak.

SCIUTTO: I'd like to ask about Ukraine, because you witnessed President Trump belittling the Ukrainian president in the Oval Office, now suspending U.S. military assistance to Ukraine. Will Canada, will other NATO allies be able to fill that gap, step in to fill that gap if you -- the U.S. continues to withhold military assistance?

JOLY: Well, I think we must be frank, we were not only surprised, but shocked by the fact that the Trump administration is now closer to the Russian administration, to Vladimir Putin, than ever in recent history. The Russian regime doesn't want the good for American people. They just don't want. They've been fighting against the very democratic values that we've all fought for now decades and centuries.

[18:10:00]

They've been trying to influence American voters through misinformation and disinformation. And they've been trying to have an impact directly on all our democracies. And that's a problem. And meanwhile, what Ukrainians are doing, Jim, they're fighting for their freedom every day, but also for ours. Because we know that President Putin doesn't have any red lines. We know that once he will have, you know, stop his war in Ukraine, he can rearm and reinvade. And then, afterwards, what he can do, he can go after Poland or other countries that are at its borders.

And that is all NATO territory. And of course, we still think NATO is important. We think that fundamentally an attack on one is an attack on all, and therefore, we have to stand strong in solidarity to ultimately prevent a wider war.

So, I know that a lot of people are tired of this war. Many of us want to make sure that we get to peace. But how we get there is as fundamental as getting there, because we can't have a bad deal. President Trump cannot have a bad deal on this. And meanwhile, why am I saying that, it's not only the repercussions that are happening in Europe, but also the Chinese are looking at what's going on. And we know that what is going on in Ukraine and how we solve that issue, ultimately, can be the same with Taiwan. And then, it's another story. It's another chapter, and we are in the midst of an international security crisis.

SCIUTTO: Yes.

JOLY: So, you look at Ukraine, you look at all the chaos that is coming out of President Trump's Oval Office, and you look at what he's doing right now on his two biggest trading partner, Canada and U.S. And I must say, I'm calling on Democrats and Republicans and all the friends we have in the U.S. to help us to say through the president, it's enough. And we need to find an off ramp and we need to make sure that we solve this.

SCIUTTO: Well, we'll see if we hear those voices in numbers in this country. Foreign Minister Joly, I do appreciate you joining.

JOLY: It's a pleasure. Thank you.

SCIUTTO: The view from the north, now, the view from the south. Mexican President Claudia Sheinbaum says she plans to unveil retaliatory measures on Sunday. Saying she is expected to have a call, however, this week with President Trump.

(BEGIN VIDEOTAPE)

CLAUDIA SHEINBAUM, MEXICAN PRESIDENT (through translator): We have therefore decided to respond with tariff and non-tariff measures, which I shall announce publicly next Sunday. It is in no way our purpose to initiate an economic or commercial confrontation.

(END VIDEO CLIP)

SCIUTTO: She also said there is no reason or valid argument for the White House decision, adding, and this is a consistent message you hear from other countries targeted, that Mexico deserves respect.

Beijing is retaliating with tariffs of its own as well, ranging from 10 to 15 percent, largely targeting, this is key, U.S. farm products, major source of revenue for this country. Marc Stewart with more now from Beijing.

(BEGIN VIDEOTAPE)

MARC STEWART, CNN CORRESPONDENT: These latest tariffs are not just symbolic. They also pack a lot of substance in the sense that they target Americans who work in farming, who work in agriculture, and food production.

So, if we break things down, starting on March 10th, China will impose a 15 percent tariff on chicken, wheat and corn, along with cotton from the United States and a 10 percent tax on products including beef, fruits, vegetables, dairy and soybeans.

Soybeans are significant as they're used to help feed China's pig farms. Pork is an important commodity in the Chinese economy. In addition, we're hearing some strong language from China's ministry of foreign affairs. Let's listen to a spokesperson.

(BEGIN VIDEO CLIP) LIN JIAN, CHINESE FOREIGM MINISTRY SPOKESPERSON (through translator): If the U.S. has ulterior motives and insists on waging a tariff war, trade war, or any other kind of war, China will fight the U.S. until the end.

We advise the U.S. to put away its bullying face and return to the right track of dialogue and cooperation before it is too late.

(END VIDEO CLIP)

STEWART: In a separate matter, China's rubber stamp legislature is getting ready for its annual meeting. Its start will coincide with President Trump's address in Washington, D.C., on Tuesday night.

Marc Stewart, CNN, Beijing.

(END VIDEOTAPE)

[18:15:00]

SCIUTTO: Coming up, Zelenskyy says he is ready to negotiate. Is the U.S.? We're going to discuss in a moment.

(COMMERCIAL BREAK)

SCIUTTO: Welcome back. Ukrainian President Volodymyr Zelenskyy offering U.S. President Donald Trump something of an olive branch after their explosive meeting in the Oval Office last week.

(BEGIN VIDEO CLIP)

VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT (through translator): What happened in the White House instead of our talks is regrettable. But we need to find the strength to move on, to respect each other, as we have always respected America, Europe, and all our partners, and to do everything together to bring peace closer.

(END VIDEO CLIP)

SCIUTTO: Note there he did call for respectful dialogue. Zelenskyy also posted on X saying that Ukraine does want to negotiate. U.S. Vice President J. D. Vance is accusing Ukraine of not acting in good faith, however. Have a listen.

(BEGIN VIDEO CLIP)

J. D. VANCE, U.S. VICE PRESIDENT: What the president has said very clearly about our Ukraine policy is that he wants the Ukrainians to come to the negotiating table. We want the Ukrainians to have a sovereign and an independent country. We think the Ukrainian troops have fought very bravely, but we're at a point here where neither Europe, nor the United States, nor the Ukrainians can continue this war indefinitely. So, it's important that everybody comes to the table and the president is trying to send a very explicit message, the Ukrainians have got to come to the table and start negotiating with President Trump. We're not saying that we're committed to one pathway or another. We're just saying, you can't even bring the peace to the forefront if the Ukrainians aren't willing to negotiate in good faith. And right now, they haven't been able to, haven't been willing to. Hopefully, that changes.

(END VIDEO CLIP)

SCIUTTO: Notably, no words there about what Moscow has shown itself willing to do. Nick Paton Walsh joins me now from Kyiv. Nick, I wonder, I'm sure there are reactions in Ukraine tonight to the message that Zelenskyy gave to Trump here. Something of an apology, but also a call for respectful dialogue. How are Ukrainians reviewing those comments?

NICK PATON WALSH, CNN CHIEF INTERNATIONAL SECURITY CORRESPONDENT: I mean, arguably what Zelenskyy put up there in the nightly address and that particular social media posting comes close to what Trump's inner circle have been demanding for. He talks about the incident in the Oval Office being regrettable, both in the video and in the social media posting, he talks about how they are committed to peace. That was specifically what Trump asked for.

[18:20:00]

Now, what's important to point out is Trump didn't specify what kind of peace he wanted Zelenskyy to commit to. Was it an emotional feeling that the president would divine? Was it what he felt the Europeans might potentially present in the days ahead? They're working on their own separate plan. Or was it the peace that potentially the U.S. and Russia might negotiate separately without Ukraine? So, lack of clarity as to what Zelenskyy is supposed to commit to from the White House here.

But also, too, we did hear from Zelenskyy very clearly at the beginnings of his own peace plan. Very similar to what we've heard from the Europeans too, specifically French President Emmanuel Macron suggesting a prisoner swap, that's a Ukrainian idea, and also, the idea of a sea, air, and energy infrastructure attack ceasefire, essentially a partial ceasefire that could be a confidence building measure, one of several.

This was a social media posting clearly designed to try and put the relationship back on track. And I think there was probably a hope amongst Kyiv officials here that that would get an immediate response from Trump personally. We haven't heard that at this stage. This moves minute by minute. We are hearing indications from sources close to the conversation in the White House that there may be moves being tried to make to get the rare earth mineral deal back on track.

To be clear, Ukraine has never said they won't sign it. They had hoped, Zelenskyy said, for a conversation about security guarantees in the White House. That may have been part of the reason why that whole Friday meeting went so badly off the rails.

But clearly, Ukraine trying to get the relationship back on track here. The White House putting out signals that might be OK too. But also, still part of Trump's inner circle talking about the fact that Zelenskyy is himself disrespectful, heaping the pressure back on, and also, frankly, to some degree, some disingenuous comments from the vice president there.

Ukraine has never said it's not against peace, it's always said it wants a specific kind of peace that can be sustained, that is backed up with security guarantees. Remember, it's not just Ukraine that says Russia can't be trusted in diplomacy and ceasefires, it's all of Ukraine's European allies who remind the U.S. in regular discussions that Russia has violated, in Ukraine's view, 25 separate ceasefire agreements it's made with Ukraine in the last decade.

So, a lot that's missing here, certainly a definite change in tone from Ukraine. They seem to be very keen to try and heal this after the pause in military aid that was announced this morning. Does that sustain? What are we really dealing with in reality outside of the theatre of all of this? But a lot of, I think, real concerns here in Ukraine so far that we haven't had an immediate response from the White House to get this relationship back on track. Jim.

SCIUTTO: And no mention of the continuing air assault on Ukraine, which you well know and witnessing there in the midst of all this. Nick Paton Walsh, thanks so much.

Well, Ukraine's set to be a focal point for President Trump during a speech to a joint session of Congress coming up just a couple hours from now. Beyond foreign policy, sources say Trump will use the speech to praise Elon Musk and his DOGE team for its mission, they say, to root out government waste. Trump is also reportedly set to defend his administration's deep cuts to the U.S. government workforce.

All this as recent polling shows the nation split along party lines over Trump's cost cutting efforts. 86 percent of Democrats disapprove, while 87 percent of Republicans approve. That's pretty much America right there today. The White House says the theme of Trump's speech is, quote, "the renewal of the American dream."

Steve Collinson joins me now. Let's talk about Ukraine first. All this talk now as to whether that statement from Zelenskyy gets these talks back on track, but back on track to what exactly? Because Trump has made quite clear that he does not view Ukraine as central to America's national security interests or even really America's responsibility. He keeps saying and indicating Europe, that's your problem.

STEPHEN COLLINSON, CNN POLITICS SENIOR REPORTER: Right. And I think the whole Ukraine process for Trump is a stepping stone to improving relationship with Russia, which is what he really wants, to reorder the world away from the current international system of allies, into these three great powers, Russia, China, and the United States.

I'm sure he will talk tonight and he'll say that he's branding himself as a peacemaker. The question is, as Nick was saying, what is a peace? It seems like he wants to impose a peace on Ukraine, but I think the last week has shown that the White House and the president, for all these claims he's the world's greatest dealmaker, hasn't got the first idea how to forge a peace.

First you bring Zelenskyy in and have this trial by television in front of the world, you know, and that obviously didn't work. Now, Zelenskyy is supposedly having to apologize. For what? For defending his own country against the vice president. And people don't just commit to peace, you commit to a process, and you hope that down the road, it will create peace.

SCIUTTO: Listen, one result of this seems to be, and I've heard this from Ukrainian commanders, that Trump has broken the trust with Ukraine, and he seems to have broken the trust with some of his key allies in Europe. That's hard to see how that's repaired.

[18:25:00]

But the point you made at first is no small thing. A U.S. president deciding he wants to return in effect to 19th century spheres of influence.

COLLINSON: Right.

SCIUTTO: And by the way, if you're watching at home, it's not just Steven and I talking about this, the Wall Street Journal editorial page is talking about this, Rupert Murdoch's publication, which we know the White House pays attention to. This is a dramatic change the U.S. president is laying out, with consequences for Europe, certainly, for Asia as well.

COLLINSON: And this is also linked to the whole trade tariff issue. What does Trump do in his foreign policy and his trade policy? He tries to impose America's strength on weaker partners. So, he talks about invading Panama.

He -- I thought Justin Trudeau, the Canadian prime minister, was very sharp on this today. He was talking about how Canada has been America's best and longest friend, but instead, Trump is attacking Canada while trying to cozy up to what he said was the murderous liar Vladimir Putin. So, a complete change in American foreign policy.

Not only is the president trying to dismantle the global system that has been the key to American power, really, since the end of the Second World War? He's simultaneously trying to dismantle the global trading system of free trade.

Now, you can argue that free trade and globalization didn't bring the benefits equally that a lot of Trump supporters, and the reason he's in the White House is because they lost a lot of their job. But the question is, does breaking up that system in a completely different economy when factories aren't going to come back to the U.S. when Trump is in power for just three more years. They're going to hedge their bets on a lot of these big companies.

So, you're disrupting the global economy and you're increasing the prices for the very people that Trump is trying to help.

SCIUTTO: And as the markets are interpreting this, and we've seen the last couple days, not a good assessment from investors as to what direction this is leading. Stephen Collinson, thanks so much, as always.

Still ahead, with a trade war underway, Donald Trump prepares to outline why, and perhaps more of his vision, as he speaks to Congress this evening.

(COMMERCIAL BREAK)

[18:30:00]

SCIUTTO: Welcome back to CNN Newsroom. I'm Jim Sciutto. And here are more international headlines we are watching today. The Vatican says that Pope Francis is now in stable condition after two episodes of respiratory failure on Monday. The 88-year-old will continue receiving his oxygen through a mask as a precaution and to help him sleep better. The Vatican is cautioning that the pope is not out of danger, that his condition remains, they describe it as complex.

Japan is suffering its worst wildfires in decades. Fires already burning thousands of acres, damaging dozens of homes. At least one person found dead. Authorities are investigating if the death was caused by the fire. The region is having its driest winter since the country started collecting data.

Thousands of people have been evacuated now from their homes in Indonesia's capital, Jakarta, as severe flooding impacts the region. There are hundreds of properties flooded with people forced to shelter in schools, mosques, and churches. Indonesia's weather agency is warning more heavy rain is on the way. Derek Van Dam has more on the flood.

(BEGIN VIDEOTAPE)

DEREK VAN DAM, CNN METEOROLOGIST (voice-over): Indonesia's capital, Jakarta, struck by flooding following heavy rains since Monday. These were the scenes Tuesday as thousands of people were evacuated and transported on rescue boats.

UNIDENTIFIED MALE (through translator): I was going to work at around half past 8:00 in the morning, and I saw the floods already high and inside these offices. The water level was at around my knee.

VAN DAM (voice-over): Indonesia's disaster agency reporting the torrential downpour has left more than 1,000 homes and many cars completely submerged in and around Jakarta. The country's weather agency warning heavy rain is expected to continue through next week.

Thousands are being housed in makeshift shelters including schools, mosques, and churches as the government works to quickly set up emergency shelters. Many people had to abandon their belongings.

UNIDENTIFIED FEMALE (through translator): The floods this time came pretty fast, and we were not able to salvage our stuff, especially in my shops and all my belongings at home are gone. VAN DAM (voice-over): The greater Jakarta metropolitan area is home to more than 30 million people and is no stranger to disasters like these. But local media reports say the flooding is the worst since the 2020 floods that killed at least 60 people.

Derek Van Dam, CNN.

(END VIDEOTAPE)

SCIUTTO: To the Middle East now, where Arab leaders are meeting in Cairo to endorse Egypt's post-war plan for Gaza. The plan would allow Gaza's roughly 2 million Palestinians to remain, in a counter proposal to President Donald Trump's plan to depopulate the territory entirely and redevelop it. It would put an interim Palestinian committee in place that committee would prepare for the return of the Palestinian Authority to run the enclave, not Hamas. It remains to be seen what role Hamas would have in Gaza, but a draft of the plan seen by CNN excludes that terror group from governing. Despite that, there are reports Hamas has agreed to the proposal.

For its part, Israel is criticizing the plan. This is a spokesperson for the Israeli prime minister, Benjamin Netanyahu, is suggesting Israel may cut Gaza's water and electricity supply. This follows Israel's decision to block humanitarian aid into the enclave unless Hamas agrees to extend the first phase of the hostage release and ceasefire deal.

As we've been saying, in just over a couple of hours Donald Trump will deliver his first address to a joint session of Congress since the start of his second term. On the agenda will be a broad range of foreign and domestic policy issues and plans, particularly with a global trade war now in full swing.

In the past few hours, the president has threatened to increase tariffs on Canada, although his commerce secretary is suggesting it's possible a compromise could be in the works. Still, Canada's prime minister could have fired the president up. Here was Justin Trudeau referencing an article by the Wall Street Journal's editorial board.

(BEGIN VIDEO CLIP)

TRUDEAU: Now, 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.

(END VIDEO CLIP)

SCIUTTO: Going straight now to the Wall Street Journal itself, Molly Ball joining. So, your editorial page calls this the dumbest trade war in history.

[18:35:00]

I wonder when you speak to lawmakers on the Hill. Certainly, Democrats are quite publicly criticizing this, Republicans as we know are afraid to stick their necks out in public with rare exceptions. Are they saying privately they agree this is dumb? What are you doing, Mr. President?

MOLLY BALL, SENIOR POLITICAL CORRESPONDENT, WALL STREET JOURNAL: Some of them say that, some of them don't. You know, as I think we've seen, there is a generational divide in Congress. And I would like to point out that I do not speak for the Wall Street Journal editorial board. I am on the news side just --

SCIUTTO: I'm just asking what you're hearing from your sources.

BALL: For viewers information, I have nothing to do with these editorials. But obviously, the more traditional Republicans, and some of them have said this publicly, do not think that tariffs are a good idea, at least in the way that Trump has sometimes talked about using them, you know, to raise revenue and rebalance global trade. The threats of tariffs that he has used to extract other concessions from countries like Canada and Mexico are sort of a different deal economically. And then there's all the uncertainty.

I mean, another thing that you hear Republicans privately grumble about is the fact that, you know, many of them have business backgrounds or are close with the business community, and it is hard for the business community to know how to plan for the future when these tariffs keep going back and forth. And when you have -- we hear on the same day that the president is going to boast about the tariffs and possibly increase them, the same time his commerce secretary is saying, actually, maybe we'll make a deal and get rid of them tomorrow. It's very difficult to run a business in that type of climate.

SCIUTTO: I mean, is there actually uncertainty, though? Because President Trump has been quite public prior to the election, post- election, and now through several moves of imposing quite severe tariffs, including on some of America's closest allies, that this is central to his policymaking and his worldview. I mean, is there anyone who thinks that Trump backs off this and says, oh, all those tariffs I was talking about, you know, I was just exaggerating?

BALL: Well, I don't think there's any question that tariffs are central to his economic world view, as you say, but the question is how he uses them, right? Before the election, when he was talking about tariffs constantly, you heard this from a lot of business leaders, right, that they viewed this as a negotiating tactic, a way to get leverage.

And up until yesterday, that was the main way that this administration was using tariffs was not imposing the tariffs, but using the threat of tariffs to extract concessions. Now, we see him actually imposing the tariffs, although there's still a lot of uncertainty about their longevity and where he's going to go next.

But I do think there's still a lot of -- I mean, do you know what else is going to get tariffed or how long it's going to last? No, none of us do. And perhaps that uncertainty is a feature, not a bug, as far as the president is concerned. He does like to keep people off balance and have them on their toes. But I think you're right that he's very into tariffs, but I think we still have a lot of uncertainty about what exactly this tariff regime is going to look like in the final accounting.

SCIUTTO: One thing I'll say is that some of the leaders of our close allies, they view it in quite certain terms that the Canadian foreign minister said just a short time ago to me that it's an existential threat to Canada because of the threat to its economy.

Molly Ball, always good to have you.

BALL: Thank you.

SCIUTTO: We'll see where the president goes tonight. Coming up, more on the escalating trade war between the U.S. and Canada. Canada's energy minister warns that higher tariffs will cause economic pain on both sides of the border. He's going to join me for that side of this trade war right after the break.

(COMMERCIAL BREAK)

[18:40:00]

SCIUTTO: Welcome back. U.S. stocks fell sharply Tuesday as the Trump administration launched a trade war against Canada, Mexico, and China. The Dow and S&P both fell well over 1 percent. The Dow finished the session near session lows. The blue chips have lost more than 1,300 points since Monday when Donald Trump confirmed those new tariffs were coming for the top U.S. trading partners. Investors clearly worried about how these trade barriers will affect the economy, economic growth, inflation, corporate profits.

U.S. retailer Target warned that it may be forced to raise prices on certain foods in the coming days. The electronics retailer Best Buy also warned of higher prices.

U.S. Commerce Secretary Howard Lutnick says a tariff compromise could still be on the cards with Mexico and China. He told Fox Business it would probably, though, not roll back the tariffs entirely.

(BEGIN VIDEO CLIP)

LUTNICK: 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's listening, because you know he's very, very fair, and very reasonable. So, I think he's going to work something out with them. It's not going to be a pause, none of that pause stuff, but I think he's going to figure out, you do more, and I'll meet you in the middle some way, and we're going to probably be announcing that tomorrow.

(END VIDEO CLIP)

SCIUTTO: Canada's minister of energy and natural resources says the terrorists are a lose-lose proposition for both nations. He joins us now, Jonathan Wilkinson, thanks so much.

JONATHAN WILKINSON, CANADIAN ENERGY MINISTER: Thank you for having me.

SCIUTTO: So, first let me ask you, do you believe Howard Lutnick when he says there, oh, maybe Trump will back off all this tomorrow?

WILKINSON: Well, it's really hard to say. We've heard lots of different things from Mr. Lutnick and from others in the administration. And they seem to change day by day. So, I think it's very difficult to know. What I do know is that the president imposed tariffs on his best friend and ally. Canada has been the Americans best friend and ally for decades. It's a very unusual situation where your best friend is being treated as an adversary.

And this is causing obviously, or will cause significant pain, yes, in Canada, but you're already seeing the pain it's going to cause in the United States. I mean, steel prices have been elevated, gasoline and diesel prices in northeastern of the United States are going up, and you're just going to see that continue.

This is a lose-lose proposition. Nobody gains out of it. Our adversary is China and we should be figuring out how we work together to address that threat.

SCIUTTO: So, of course, Canada has announced its own retaliatory tariffs. The premier of Ontario said something today that was notable. He said that he might withhold power from Northern U.S. states of course northern U.S. states get a lot of their electricity from across the border. Is that a potential part of Canada's retaliation if this trade war continues?

WILKINSON: Well, you know, Canada is a federal state, just as the United States, and there are some things provinces can do on their own that is different from what the federal government may do. But I would say that the initial response from Canada was to put tariffs on American goods that are sold in large quantities in Canada, for which there are reasonably available alternatives. So, you know, think Kentucky bourbon or orange juice.

With the purpose of actually trying to ensure that people in the United States understand and feel the kind of pressure that Canadians are feeling. There are other tools in our toolbox, including energy, including critical minerals that maybe become part of this conversation down the road, but we don't want that.

I mean, at the end of the day, we want to see the tariffs lifted. We want to continue to have a good, productive economic relationship with the United States, which is what both countries have enjoyed for decades.

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SCIUTTO: In December, 60 percent of the crude oil imported by the U.S. came from Canada, something you know quite well. I wonder as a potential step, if this continues, could Canada restrict oil exports to the U.S.? If it is true, as your prime minister has said, that Donald Trump's intention may be to collapse the Canadian economy. Might Canada be forced into a position to take a step such as that?

WILKINSON: Well, certainly energy is an important conversation and, you know, folks should understand that a lot of the oil that is flown from Canada is very cost effective for American refineries. But it's also true that many of these refineries in the Midwest and the Gulf Coast are set up to process heavy crudes that are not produced in the United States. So, there really is no choice. And the tariffs that President Trump has put into place are actually going to increase the cost of gasoline at the pump for everybody.

In terms of restricting or putting our own export tariffs, I mean, that may be something we get to down the road, but we're not interested in escalating this. We're interested in finding a pathway to a more thoughtful and reasoned conversation. I would also say that, you know, beyond energy and perhaps even more important than energy are discussions around critical minerals.

Canada provides a lot of critical minerals. The only other source of those critical minerals is China. It would be a kind of a perverse outcome if the United States stopped buying critical minerals from China from Canada and started buying them even more so from China. I'm just not even -- it just belies logic in terms of what -- why you would do that.

SCIUTTO: Is this recoverable, right? Because it is possible that Trump pulls these back partially, but he's made quite clear that tariffs are central to his economic policy, his foreign policy. He's also made it quite clear that he's certainly willing to publicly berate some of America's closest allies, and even call into question security commitments to those allies.

Is this something that Trump can dial back in your view, or from Canada's perspective, is the cat already out of the bag and you have to reassess your relationship with the U.S.?

WILKINSON: Well, first of all, I do think there is a path back to a more thoughtful conversation about how we can think about North America rather than thinking just about the United States. And Canada has a number of things that the United States needs, whether that is in the energy space or in the critical minerals or other material spaces. Canada actually needs the U.S. market. And so, I do think there is a pathway back to a more constructive conversation, which is what we've been having for a long time.

But I will tell you that certainly within Canada, there is going to be some question about how we better diversify trade, so we're not quite as exposed to the U.S. market, because I would say that Canadians probably have lost a little bit of faith in our American friends over the course of this past while, and I say that with a very heavy heart.

Most of us have friends who are American. Many of us have relatives that are American. I used to work for an American-based company, and many of the tech companies that I ran actually had American investors and American development partners. We've always thought of each other as enormously close, but different. And I think it's really, really sad that we are at this point.

SCIUTTO: Yes, I hear you. I lived in Canada myself, and I find it quite sad as well. Jonathan Wilkinson, Canada's minister of energy and natural resources, thanks so much for joining. WILKINSON: Thank you very much.

SCIUTTO: Coming up, Donald Trump's problem with the Panama Canal could potentially be solved. The brand-new deal that might blunt his threat to reclaim the Canal unilaterally. That's coming up.

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SCIUTTO: It is possible President Trump could be able to drop his threats to unilaterally retake the Panama Canal after a multibillion- dollar deal announced today. An investor group led by American financial giant BlackRock is buying two Panama Canal ports owned previously by a Hong Kong firm, which Trump cited as evidence that China controls the Canal.

Patrick Oppmann has more from Havana.

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PATRICK OPPMANN, CNN CORRESPONDENT: It's a potential deal that could ease tensions between the Trump administration and the country of Panama over the management of the Panama Canal. The mega investment management group BlackRock announced that it is taking controlling interest to the tune of nearly $23 billion dollars of ports -- more than 40 ports managed around the world by the Hong Kong company, CK Hutchison.

The two ports that are of particular interest, though, are on either side of the Panama Canal. And these are the ports that Donald Trump -- President Donald Trump has pointed to for months, claiming often without any proof, that they are essentially managed by China, he says, because CK Hutchison, a Hong Kong company is -- based in Hong Kong, that it falls under the influence of China.

And although these ports what they do is they provide services to ships coming in and out of the Canal, he says, without proof, that that means that the Panama Canal has essentially been taken over by China and then the U.S., he has said repeatedly, needs to take back the Panama Canal. This is something the Panama's government has said is completely false. They've argued against this and said that they do not overcharge the U.S. for the transshipment of its boats and ships through the Panama Canal. But this has raised tensions to the point that Trump has said that he would even consider using military means to take back the Panama Canal.

Panama does not have an army. So, this is of particular concern. But this deal, this mega deal, would allow an American company to take control of these two ports, something that Donald Trump could claim as a win, certainly lessening the influence of China in the region.

But of course, so much of what Donald Trump has done and said about the Panama Canal has been up and about quite unpredictable.

Patrick Oppmann, CNN, Havana. (END VIDEOTAPE)

SCIUTTO: Our thanks to Patrick there. Texans back here are grappling with a massive dust storm, turning skies hazy and red, leading to hundreds of flights being canceled or delayed. High winds pushing a wall of dust and debris across the American Southwest. The wind is so strong, it's even forced some cars off the road. Authorities also warning that wind could spark wildfires.

Before beginning Ash Wednesday and Lent, millions of people around the world are celebrating what's known colloquially as Fat Tuesday today.

Some of the most famous Carnival celebrations happening of course in Brazil. No one does it like that. The festivities traditionally start the Friday before Ash Wednesday. Brazilian Carnival known for its amazing floats, dancers like that, and its parades. Celebrations also underway in Europe. Croatia's Carnival parties date back some 500 years. Today, about 11,000 people take part in the parades there.

Finally, in the U.S. City of New Orleans, Fat Tuesday is better known by its French moniker, Mardi Gras. Expect floats, parades, and lots of bead throwing across the city.

We will be sure to bring you Donald Trump's address in its entirety this evening. Our special coverage begins about two hours from now. Immediately after President Trump's address, we'll also bring you the Democratic rebuttal, which is being delivered tonight by Democratic Senator Elissa Slotkin of Michigan.

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Thanks so much for joining us today. I'm Jim Sciutto in Washington, D.C. Please do stay with CNN.

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