US President Donald Trump has walked back his threat to double tariffs on Canadian steel and aluminum to 50 per cent, just hours after initially making the announcement. However, the 25 per cent tariffs have still gone into effect as planned.
The reversal followed a decision by Ontario to suspend a new 25 per cent charge on electricity exports to some northern US states. Ontario Premier Doug Ford had earlier hinted at imposing these charges in retaliation for Trump’s trade policies but later chose to de-escalate tensions.
The trade dispute marked another flashpoint in US-Canada relations under Trump’s presidency. Canada, one of the US’s closest trade allies, has frequently been targeted by Trump’s aggressive trade measures. His administration had previously imposed 25 per cent tariffs on steel and aluminum from several countries, including Canada and Mexico.
Despite exempting some products temporarily, Trump justified the move by citing concerns over illegal drugs and migrant flows from Canada into the US. Canada, however, rejected these claims and called the tariffs “unjustified,” announcing retaliatory duties on C$30 billion ($22 billion) worth of US imports.
Ford had initially threatened to escalate matters by increasing taxes on electricity exports to the US or even halting supplies altogether. However, he later reconsidered, stating, “With any negotiation, there’s a point where both parties get heated, and the temperature needs to come down.”
Ford credited Commerce Secretary Howard Lutnick for helping mediate discussions, saying, “We have both agreed, let cooler heads prevail. We need to sit down and move this forward.”
Trump had responded to Ford’s initial tariff plans with a social media post threatening to double levies on Canadian steel and aluminum. He also criticized Canada for depending on the US for military protection and even suggested that Canada should become the 51st state to eliminate tariffs altogether.
The White House portrayed the development as a victory, stating that Trump had once again used the US economy’s strength to secure a win for Americans.
Stock Market Turbulence
The trade tensions rattled global financial markets. The S&P 500 fell by another 0.7% on Tuesday, following a 2.7 per cent drop on Monday (11), marking its worst single-day decline since December.
European markets also took a hit, with the FTSE 100, CAC 40, and DAX indices all closing lower.
Investors had already been on edge after Trump’s remarks about the US economy being in a “transition”, sparking recession fears. Analysts worry that continued trade wars could push inflation higher while discouraging economic activity.
American businesses, particularly those reliant on imported materials, have been feeling the effects of Trump’s tariffs.
Jason Goldstein, the founder of Icarus Brewing in New Jersey, expressed concern, saying, “It’s definitely a worrying time for us.”
Goldstein revealed that his suppliers had warned of rising costs for essential goods, including grain and aluminum cans. To counter the uncertainty, his company has stockpiled an extra month’s supply of cans and put other purchases on hold.
“Never before in my life have I had to read so much news just to know what my industry will look like tomorrow,” he added.
While Trump has backed down from escalating the trade war with Canada, tensions remain high, and businesses on both sides of the border continue to navigate economic uncertainty.
