President Donald Trump said Tuesday that he would double his planned tariffs on steel and aluminum from 25% to 50% for Canada, a retaliation that prompted the provincial government of Ontario to back down on its planned surcharges on electricity sold to the United States.
Ontario Premier Doug Ford said he decided to make the concession after Commerce Secretary Howard Lutnick agreed to renewed trade talks, CNBC reports.
Ford said that earlier on Tuesday he and Lutnick “had a productive conversation about the economic relationship between the United States and Canada.”
“We have both agreed, let cooler heads prevail,” Ford told reporters, hours after U.S. President Donald Trump escalated an already hot trade war by saying he would double tariffs on Canadian steel and aluminum imports from 25% to 50%.
Tuesday's escalation and retreat in the ongoing trade war between the United States and Canada only compounded the rising sense of uncertainty in terms of how Trump's tariff hikes will play out. His spate of tax increases on imports and plans for more have roiled the stock market and stirred up recession risks.
Trump said on social media that the increase of the tariffs set to take effect on Wednesday is a response to the 25% price hike that Ontario put on electricity sold to the United States.
“I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD,” Trump posted on Truth Social.
Ontario Premier Doug Ford said Tuesday afternoon that U.S. Commerce Secretary Howard Lutnick called him and Ford agreed to remove the surcharge. He said he was confident that the U.S. president would also stand down on his own plans for 50% tariffs on Canadian steel and aluminum.
“He has to bounce it off the president but I’m pretty confident he will pull back,” Ford said on Trump’s steel and aluminum tariff threat. “By no means are we just going to roll over. What we are going to do is have a constructive conversation.”
Trump told reporters that he’s looking at returning the steel and aluminum tariffs on Canada to 25% and would “probably” do so.
Asked if the United States could face a recession, Trump said, “I don't see it.”
After a brutal stock market selloff on Monday and further jitters Tuesday, Trump faces increased pressure to show he has a solid plan to grow the economy. So far the president is doubling down on the tariffs he talked up repeatedly during the 2024 campaign and can point to Tuesday's drama as evidence that taxes on imports are a valuable negotiating tool, even if they can generate turmoil in the stock market.
Trump suggested Tuesday that tariffs were critical for changing the U.S. economy, regardless of what the stock market did on any given day.
“Markets are going to go up and they’re going to go down but, you know what, we have to rebuild our country,” he told reporters.
The U.S. president has given a variety of explanations for his antagonism of Canada. He has said that his separate 25% tariffs on all imports from Canada, some of which are suspended for a month, are about fentanyl smuggling and voicing objections to Canada putting high taxes on dairy imports that penalize U.S. farmers. He also continued to call for Canada to become part of the United States as a solution, which has infuriated Canadian leaders.
“The only thing that makes sense is for Canada to become our cherished Fifty First State," Trump posted Tuesday. "This would make all Tariffs, and everything else, totally disappear.”
Incoming Canadian Prime Minister Mark Carney said his government will keep tariffs in place until Americans show respect and commit to free trade after Trump threatened historic financial devastation for his country.
Carney, who will be sworn in as Justin Trudeau’s replacement in coming days, said Trump’s latest tariffs are an attack on Canadian workers, families and businesses.
“My government will keep our tariffs on until the Americans show us respect and make credible, reliable commitments to free and fair trade,” Carney said in a statement.
Canadian officials are planning retaliatory tariffs in response to Trump’s specific steel and aluminum tariffs. Those are expected to be announced Wednesday.
Carney was referring to an initial $30 billion Canadian (US$21 billion) worth of retaliatory tariffs that have been applied on items like American orange juice, peanut butter, coffee, appliances, footwear, cosmetics, motorcycles and certain pulp and paper products.
Trump also has targeted Mexico with 25% tariffs because of his dissatisfaction over drug trafficking and illegal immigration, though he suspended the taxes on imports that are compliant with the 2020 USMCA trade pact for one month.
Asked if Mexico feared it could face the same 50% tariffs on steel and aluminum as Canada, President Claudia Sheinbaum, said “No, we are respectful.”
Trump was set to deliver a Tuesday afternoon address to the Business Roundtable, a trade association of CEOs that during the 2024 campaign he wooed with the promise of lower corporate tax rates for domestic manufacturers. But his tariffs on Canada, Mexico, China, steel, aluminum — with plans for more to possibly come on Europe, Brazil, South Korea, pharmaceutical drugs, copper, lumber and computer chips — would amount to a massive tax hike.
The stock market’s vote of no confidence over the past two weeks puts the president in a bind between his enthusiasm for taxing imports and his brand as a politician who understands business based on his own experiences in real estate, media and marketing.
Harvard University economist Larry Summers, a former treasury secretary for the Clinton administration, on Monday put the odds of a recession at 50-50.
“All the emphasis on tariffs and all the ambiguity and uncertainty has both chilled demand and caused prices to go up,” Summers posted on X. “We are getting the worst of both worlds - concerns about inflation and an economic downturn and more uncertainty about the future and that slows everything.”
The investment bank Goldman Sachs revised down its growth forecast for this year to 1.7% from 2.2% previously. It modestly increased its recession probability to 20% “because the White House has the option to pull back policy changes if downside risks begin to look more serious.”
Trump has tried to assure the public that his tariffs would cause a bit of a “transition” to the economy, with the taxes prodding more companies to begin the years-long process of relocating factories to the United States to avoid the tariffs. But he set off alarms in an interview broadcast on Sunday in which he didn't rule out a possible recession.
“I hate to predict things like that,” Trump said on Fox News Channel's “Sunday Morning Futures." ”There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. .. It takes a little time. But I don’t — I think it should be great for us. I mean, I think it should be great."
The promise of great things ahead did not eliminate anxiety, with the S&P 500 stock index tumbling 2.7% on Monday in an unmistakable Trump slump that has erased the market gains that greeted his victory in November 2024. The S&P 500 index fell roughly 0.2% in Tuesday afternoon trading, paring earlier losses after Ontario backed down on electricity surcharges.
Trump has long relied on the stock market as an economic and political gauge to follow, only to look past it as he remains determined so far to impose tariffs. When he won the election last year, he proclaimed that he wanted his term to be considered to have started Nov. 6, 2024 on Election Day, rather than his Jan. 20, 2025 inauguration, so that he could be credited for post-election stock market gains.
Trump also repeatedly warned of an economic freefall if he lost the election.
“If I don’t win you will have a 1929 style depression. Enjoy it,” Trump said at an August rally in Pennsylvania.
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