The main event in Washington this week is President Trump's address to Congress on Tuesday, March 4 at 9 p.m. (the speech in the first year of a presidency is not called a State of the Union address). The major policy focus of the week will be the 25% tariffs on Canada and Mexico (10% on Canada energy resources) set to take effect March 4. The tariffs were announced in early February and then delayed for one month amid continued negotiations. Last week, President Trump said there was insufficient progress on stemming the flow of illegal drugs from those nations into the US, which was the issue cited in imposing the tariffs.

A story in the March 1 Wall Street Journal said of efforts by officials from the nations to forestall the tariffs:

• "Senior Mexican officials are focusing on delivering tangible results on the border and drugs that Trump can see as signs of progress, but there are worries that it won't be as easy to avoid tariffs as it was on Feb. 3," when the delay was secured by sending National Guard troops to the border.
• "Canadian officials are now aiming to convince the Trump administration that they have reinforced their border. A delegation of Canadian officials visited Washington in recent days to make the case that fentanyl and drugs are under control on the northern border … "

Mexican officials have reportedly offered to impose tariffs on certain common foreign competitors, and Treasury Secretary Scott Bessent suggested in a Bloomberg interview on Friday that Canada should also consider such a move. "So, in a way, we could have fortress North America from the flood of … imports that's coming out of the most unbalanced economy in the history of modern times," he said.

On Fox Sunday Morning Futures, Commerce Secretary Howard Lutnick said the concerns are two-fold: "The March 4 is about the border, and both Mexico and Canada have done a reasonable job on the border. They're both working hard on the border. But the fentanyl continues to come into this country … " He said the President is "sort of thinking about right now how exactly he wants to play it with Mexico and Canada. And that is a fluid situation." While "there are going to be tariffs on Tuesday on Mexico and Canada," he said, "exactly what they are, we're going to leave that for the president and his team to negotiate."

The President has also signed a memo for a review of reciprocal tariffs, and Lutnick was asked whether the rate would be higher than 25% for Europe, to account for value-added taxes. "Well, there's two things going on. Number one, there's reciprocity, right? They have a VAT tax, and they have a tariff on cars, so 10% on cars. And all sorts of other products. Plus, they have all these non-tariff barriers … " he said. "And then, number two, the President has called out cars. He's called out semiconductors. He's called out pharmaceuticals. He's called out copper, steel, and aluminum. He is focused on bringing manufacturing back to America, and he's going to make sure it comes back. So, we want cars made here."

Budget reconciliation — Following last week's House passage of an a FY2025 budget resolution that clears the way for a bill with TCJA extensions and spending cuts, the House and Senate must reach an agreement and pass the same budget to unlock the reconciliation process that allows the bill to pass with Republican-only votes. Considerable differences exist between House and Senate Republicans, so this process could take some time. Outstanding tax issues that need to be decided between the chambers include whether to a use a current law baseline like the House budget resolution — which would allow for tax cut extensions to be 9-10 years — or a current policy baseline under which the costs of such extensions wouldn't be counted, making permanency possible. The latter approach has its backers in both chambers, but also comes with concerns about whether it would be accepted by the Senate parliamentarian under the reconciliation rules. "We are going to do everything we can to put the current-policy baseline into place," said Senate Finance Committee Chairman Mike Crapo (R., Idaho) said in a WSJ story. "Current policy on taxes means we are declining or refusing to raise taxes."

There is also a focus on spending cuts called for under the resolution, which requires at least $2 trillion in deficit reduction from other committees to avail the Ways & Means Committee a full $4.5 trillion net deficit increase for tax cuts. A minimum of $1.5 trillion in mandatory spending cuts is required from the other committees, and the total tax cut amount is reduced under the resolution by the amount savings fall short of $2 trillion. Asked on Meet the Press whether cuts to Medicaid, Medicare, and Social Security are off the table, House Speaker Mike Johnson (R-LA) said, "Yes," but he added that "we have a moral responsibility to ensure that those programs are conducted in a way that does not allow for this massive fraud and abuse."

On CNN March 1, Ways & Means member Nicole Malliotakis (R-NY) was asked whether the $880 billion in savings from the Energy & Commerce Committee will require cuts to Medicaid. "I was able to get assurances from the president as well as the Speaker, that we were not going to impact beneficiaries who meet the eligibility requirements and also that the reimbursement for New York state would remain at 50%, that it would not be lowered. That was critical to protect my hospitals," Malliotakis said, adding that some reports have said there's about $100 billion a year in waste, fraud and abuse in the Medicare and Medicaid system, making $880 billion not so far-fetched. "So, there's plenty to go after in terms of waste, fraud and abuse."

There are differences of opinion over whether House Republicans should compromise with the Senate, which passed an FY2025 budget that only contemplated increased spending for the border in a first budget reconciliation bill, meaning tax would be taken up in a separate bill later in the year. Politico said House "hard-liners," including Rep. Chip Roy (R-TX), are "calling on Johnson to stand strong against Senate attempts to water down the deep cuts they secured." Others want changes to soften the cuts. The story cited Rep. Don Bacon (R-NE) as saying, "The Senate will never agree with [those cuts] — that's just the fact." The schedule for negotiations on a unified budget resolution isn't clear, but Treasury Secretary Scott Bessent and congressional leaders — House Speaker Johnson, Senate Majority Leader John Thune (R-SD), and tax committee chairmen Crapo and Jason Smith (R-MO) and — are set to meet weekly on tax issues.

Government funding — With the expiration of government funding looming March 14, Speaker Johnson said on Meet the Press, "We're looking to pass a clean CR, to freeze funding at current levels, to make sure that the government can stay open while we begin to incorporate all these savings that we're finding through the DOGE effort and these other sources of revenue that President Trump's policies are bringing to the table." Senate Appropriations Committee Ranking Member Patty Murray (D-WA) has said a full-year continuing resolution is a nonstarter that could allow the "administration to adjust spending priorities and potentially eliminate longstanding programs." Democratic support is likely to be required for a funding extension.

Congress — Bill introductions of interest from February 27 include:

• S. 763, Telehealth Expansion Act, to permanently extend the exemption for telehealth services from certain high deductible health plan rules, Senator Steve Daines (R-MT)
• S. 772, to make the exclusion for certain employer payments of student loans under educational assistance programs permanent, Senator Mark Warner (D-VA)
• S. 788, to impose an excise tax on the failure of certain hedge funds owning excess single-family residences to dispose of such residences, Senator Jeff Merkley (D-OR)
• S. 796, to repeal the corporate alternative minimum tax, Senator John Barrasso (R-WY)
• S. 798, Capital Gains Inflation Relief Act, to ensure an individual's cost basis in a capital asset receives the same fair and equitable treatment as in other areas of the tax code by indexing the basis for inflation, Senator Ted Cruz (R-TX)

The Senate is back in session today (March 3) with a vote at 5:30 p.m. on confirmation of the nomination of Linda McMahon to be Secretary of Education. There may also be a vote this week on the nomination of Lori Chavez-DeRemer to be Labor Secretary.

The House is also back in today with suspension votes including a Ways & Means Committee bill, the Chronic Disease Flexible Coverage Act (H.R. 919), which allows for employers who offer high-deductible health plan (HDHP) coverage for their employees the option of including pre-deductible coverage for certain healthcare services that treat common chronic illnesses, codifying a Trump administration policy established in 2019.

Later in the week are votes on disapproval resolutions under the Congressional Review Act process:

• H.J. Res. 61 — Providing for congressional disapproval of the rule submitted by the EPA on "National Emission Standards for Hazardous Air Pollutants: Rubber Tire Manufacturing."
• H.J. Res. 42 — Providing for congressional disapproval of the rule submitted by the Department of Energy relating to "Energy Conservation Program for Appliance Standards: Certification Requirements, Labeling Requirements, and Enforcement Provisions for Certain Consumer Products and Commercial Equipment."
• S.J. Res. 11 — Providing for congressional disapproval of the rule submitted by the Bureau of Ocean Energy Management relating to "Protection of Marine Archaeological Resources."

On Thursday, March 6¸the Senate Finance Committee will hold a hearing on the nomination of Michael Faulkender to be Deputy Secretary of the Treasury.

The Senate Health, Education, Labor & Pensions Committee will hold a hearing to Nomination of Jayanta Bhattacharya to serve as Director of the National Institutes of Health on Wednesday, March 5, at 10 a.m. The HELP Committee will hold a hearing to consider the Nomination of Martin Makary to serve as Commissioner of Food and Drugs on Thursday, March 6, at 10 a.m.