Trump backtracks on doubling tariffs on aluminum and steel to 50% for Canada
In another chaotic day, the U.S. president gets in return that the province of Ontario will not raise the price of electricity serving Michigan, New York and Minnesota by 25%
The tariff war between the United States and Canada flared up again on Tuesday when U.S. President Donald Trump threatened to impose a 50% tariff on Canadian aluminum and steel imports, doubling his previous threat of 25%, starting on Wednesday March 12. The decision was taken in response to the announcement on Monday that the Canadian province of Ontario was adding a 25% percent surcharge to the electricity it exports to Michigan, Minnesota and New York. Markets plummeted on Monday amid fears of a U.S. recession caused by the White House’s aggressive and volatile trade policy. It was the worst day of the year for stocks. A few hours later, the extra tariffs were dropped. And in return, Canada agreed to eliminate its own surcharge on the export of electricity.
Trump made the announcement, as usual, on his platform Truth Social, from which he was oddly absent for almost the entire previous day, while the bad economic news continued. The U.S. president retaliated with a long post featuring his characteristic and emphatic use of capital letters, in which he accused Canada of being one of the nations with the highest tariffs in the world. “This will go into effect TOMORROW MORNING, March 12th. Also, Canada must immediately drop their Anti-American Farmer Tariff of 250% to 390% on various U.S. dairy products, which has long been considered outrageous,” he added, alluding to the levies on a sector essential to the Midwest region.
Hours after the president’s message, Ontario announced that, after negotiating with US officials, it was withdrawing the increase in electricity with which it sought to respond to Trump’s threats, who commented in a meeting with reporters at the White House that he would probably back down on the threat launched in the morning. Ultimately, a spokesperson for the Administration confirmed that the tariffs on aluminum and steel would no longer be doubled, but that the 25% levy was still in effect for midnight.
Trump had also announced that he will declare “a National Emergency on Electricity within the threatened area” due to the high cost of electricity from Ontario. He also threatened to escalate on April 2, the day the United States has been announcing that it will unleash a storm of “reciprocal” tariffs on trading partners around the world. “If other egregious, long time Tariffs are not likewise dropped by Canada, I will substantially increase, on April 2nd, the Tariffs on Cars coming into the U.S. which will, essentially, permanently shut down the automobile manufacturing business in Canada,” he wrote, saying nothing about the serious consequences this could also have for the U.S. auto sector, which is organized around Detroit and is closely tied with the auto sector on the other side of the border.
Then Trump went on to reiterate his idea about annexing Canada. “Also, Canada pays very little for National Security, relying on the United States for military protection. We are subsidizing Canada to the tune of more than 200 Billion Dollars a year. WHY??? This cannot continue. The only thing that makes sense is for Canada to become our cherished Fifty First State.”
Stocks take a tumble
The news thwarted the timid hint of improvement with which Wall Street opened the trading session, which recorded its worst day of 2025 on Monday with a 2.7% drop in the S&P 500 index. Although in the early stages of the session both this index and the Nasdaq (which is highly dependent on technology) showed gains, the announcement of new reprisals against Canada turned the market around with declines of around 1%.
The wave of pessimism is due to a downturn of the U.S. economy, evident in the data and in analysts’ downward forecasts. It is also due to Trump’s hesitations on Sunday, when, on two occasions, in an interview on Fox News and on board Air Force One, he was unable to rule out the possibility of a recession. There is also a conviction on the trading floor that, contrary to analysts’ expectations, the president will not correct his course even if his policies detract from growth, add inflation or cause market declines.
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