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Lutnick: Saturday tariff deadline aims to curb fentanyl

flows

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Commerce nominee says China, DeepSeek leveraged US

technology

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Lutnick says he advised Trump to pursue across-the-board

tariffs

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Nominee won't commit to honoring prior chips grant

approvals

(Adds Canada foreign minister comments in paragraphs 5 and 6)

By David Shepardson and David Lawder

WASHINGTON, Jan 29 (Reuters) - President Donald Trump's

nominee to run the Commerce Department, Howard Lutnick, said on

Wednesday that Canada and Mexico can avoid looming U.S. tariffs

if they act swiftly to close their borders to fentanyl, while

vowing to slow China's advancement in artificial intelligence.

Lutnick, a billionaire Wall Street CEO, said at his U.S.

Senate confirmation hearing that he has advised Trump to pursue

across-the-board tariffs country-by-country to restore

"reciprocity" to America's trading relationships. He also said

he would erect stronger curbs on China's access to U.S.

technology, including advanced AI semiconductors.

Lutnick said Trump's Saturday deadline for imposing 25%

tariffs on goods from Canada and Mexico was meant to pressure

the two countries to stop the flow of fentanyl into the U.S. The

threatened duties are separate from the broad review of U.S.

tariffs, trade deals and other trade policy ordered by Trump

when he took office last week.

"So this is a separate tariff to create action from Mexico

and action from Canada," Lutnick said of the 25% duty threat.

"And as far as I know, they are acting swiftly, and if they

execute it, there will be no tariff."

Canada's Foreign Minister Melanie Joly, who is visiting

Washington to help ease tensions, said Lutnick's "comments

regarding the fact that we were addressing the border issue and

fentanyl were positive."

She said the ultimate decision on tariffs rests with Trump,

but Canada is prepared to retaliate with its own trade penalties

if the president makes good on his threats.

In a hearing heavy with technical questions, Lutnick

repeatedly called for a restoration of "reciprocity" on trade

with other countries, which is in line with Trump's vow to erect

a universal tariff of 10% on all U.S. imports.

"My way of thinking, and I discussed this with the

president, is country by country, macro," Lutnick said when

asked his preference for how Trump should impose tariffs.

"We are treated horribly by the global trading environment.

They all have higher tariffs, non-tariff trade barriers and

subsidies," Lutnick said. "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."

VAST AGENCY

As Commerce secretary, Lutnick, who is worth $1.5 billion

according to Forbes, would run a vast government agency with

47,000 employees responsible for U.S. export controls,

anti-dumping and anti-subsidy duties, weather forecasting,

fisheries, economic data and promotion of investment in the U.S.

Trump also has designated Lutnick as the leader of his trade

policy, with oversight of the U.S. Trade Representative's

office, but he did not provide details of how Commerce and USTR

would coordinate their work.

He reiterated his plans to resign from his positions as the

head of BGC Group ( BGC ), its affiliate Cantor Fitzgerald and

other companies, and sell all of his holdings to avoid any

conflicts of interest.

Lutnick's trade comments echoed those made by Trump, who

last week said the European Union is "very, very bad to us" and

called tariffs "the only way ... you're going to get fairness."

He criticized Europe's higher auto tariffs and said that a

$7,500 U.S. tax subsidy for leased foreign-made electric

vehicles needs to be ended "as fast as we possibly can."

Lutnick also said he wanted to improve U.S. access to

Canada's largely closed dairy market and would work to protect

the U.S. market from fisheries imports from Russia and China.

"We gotta get rid of those communist fish," he joked.

CHINA AI RACE

Following the U.S. financial market reaction to the

emergence of Chinese AI startup DeepSeek's powerful, low-cost

generative AI model, members of the Senate Commerce, Science and

Transportation Committee repeatedly asked Lutnick how he would

maintain U.S. AI leadership.

Lutnick said DeepSeek had misappropriated U.S. technology to

create a "dirt cheap" AI model and vowed to impose new

restrictions on Beijing's technology access.

"They stole things. They broke in. They've taken our IP,"

Lutnick said of China. "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."

Lutnick said that former president Joe Biden's legislation

to provide $52.7 billion in subsidies for American semiconductor

production, research and workforce development is "an excellent

downpayment" to rebuild the sector in the U.S., but needs to be

reviewed.

CHIPS GRANTS

But he declined to commit to honoring CHIPS and Science Act

grants that have already been approved by the Commerce

Department, saying he wanted to "read them and analyze them and

understand them."

His comment follows Trump's order on Tuesday to freeze

hundreds of billions of dollars in federal grants, loans and

other aid, a move that was temporarily blocked by a federal

judge.

The Biden administration raised Trump's prior 25% duty on

Chinese computer chips to 50% this year. But Trump said on

Monday he would impose tariffs on all imported semiconductors

and pharmaceuticals and add to steel tariffs to push companies

to manufacture more of these products in the U.S.

Lutnick said there were too many exclusions from steel

tariffs, and these need to be simplified. He added: "I'm a more

simple view of tariffs sort of guy, and the president is of like

mind."

(Reporting by David Shepardson and David Lawder; writing by

David Lawder; Editing by Leslie Adler, Chizu Nomiyama and

Lincoln Feast.)