Instant Market Karma: Trump's tariffs have backfired and he now he plans to scale them back on Wednesday.

Yiannis Damellos

A few minutes after the U.S. stock market closed for a second consecutive day of significant declines, U.S. Commerce Secretary Howard Lutnick announced that President Donald Trump would "probably" reach tariff compromise deals Canada and Mexico very soon, possibly even tomorrow. He added that potential compromise would likely involve scaling back at least part of Trump's new 25% tariffs on imports from Mexico and Canada.

The sharp declines were partly driven by investors' concerns that Trump's aggressive policies could trigger a detrimental trade war. Lutnick stated on "Fox Business" the compromise with Canada and Mexico will be announced as early as Wednesday.

While the Cabinet Secretary did not specify what Trump would agree to, he mentioned that the U.S. president would be willing to meet Canada and Mexico " in the middle." He also appeared to rule out the possibility that Trump would lift tariffs.

On Tuesday, the Trump administration reinstated comprehensive 25% tariffs on Canadian and Mexican imports after a one-month suspension. Trump, who has frequently touted tariffs as a potent negotiating instrument, justified the policy by alleging that the neighboring countries were not effectively curbing the influx of drugs and crime into the United States.

“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,” he said.

Lutnick described an agreement in which Canada and Mexico would commit to "do more," at which point Trump would "meet you in the middle in some way."

"We're probably going to be announcing that tomorrow," he stated.

Lutnick emphasized that the announcement would not be another pause.

These comments were made just hours before Trump was scheduled to deliver a primetime to a joint session of Congress.

Stocks declined on Tuesday amid renewed fears of a broader trade war as tariffs long threatened by the Trump administration effect.