On Tuesday, President Donald Trump threatened to escalate tariffs on steel and aluminium imports from Canada from 25% to 50%. This prompted the Ontario government to halt its planned electrical surcharges for the United States. Subsequently, White House trade adviser Peter Navarro revealed that the president reconsidered the tariff increase, although the federal government is still set to enforce a 25% tariff on all steel and aluminium imports starting Wednesday.
This exchange highlights a pivotal moment in the ongoing trade tensions between the U.S. and Canada, raising concerns about potential economic impacts and risks of recession. Trump’s announcement shocked financial markets, linking the tariff hikes to Ontario’s 25% electricity surcharge on U.S. sales. He stated on Truth Social, “I have instructed my Secretary of Commerce to add an ADDITIONAL 25 per cent Tariff, to 50 per cent, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA.”
Amid these developments, Ontario Premier Doug Ford received a call from U.S. Commerce Secretary Howard Lutnick, leading Ford to optimistically suggest that the U.S. would retreat from its proposed tariff hike. He emphasised the need for constructive dialogue rather than capitulation. Following a tumultuous few days for the stock market, Trump is under pressure to present a stable economic plan while maintaining his commitment to tariffs as an effective negotiation strategy.
Trump has repeatedly cited various reasons for his stance against Canada, including issues related to the opioid crisis and high taxes on dairy imports that affect American farmers. He even suggested that integrating Canada as the “Fifty First State” would eliminate tariffs entirely, a comment that provoked backlash from Canadian leaders.
Incoming Canadian Prime Minister Mark Carney pledged to uphold tariffs on American goods until the U.S. demonstrates a commitment to respectful, fair trade practices. He classified Trump’s tariffs as detrimental to Canadian workers and indicated that retaliatory tariffs would be announced soon, aimed at a range of American products worth approximately CAD 30 billion.
Moreover, Trump has extended his tariff ambitions towards Mexico and other nations, maintaining a tough negotiating stance despite widespread economic concerns. As market uncertainty grows, investment bank Goldman Sachs has downgraded its growth forecast and increased the probability of a recession to 20%, indicating mounting pressure on the U.S. economy.
Despite suggesting that tariffs could lead to a beneficial transition for the economy, Trump has not dismissed the possibility of recession, leading to widespread anxiety over the potential economic fallout of aggressive trade policies.