US President Donald Trump has announced plans to escalate tariffs on steel and aluminium imports from Canada, raising them from 25% to 50%. This move comes in response to Ontario’s recent hike in electricity prices for sales to the US, which Trump claims justifies the increase. Through a post on Truth Social, he instructed his Secretary of Commerce to implement this additional 25% tariff, labelling Canada as “one of the highest tariffing nations anywhere in the world.”
Trump’s hostility towards Canada has various justifications, including accusations of fentanyl smuggling and high dairy import taxes that disadvantage American farmers. In a provocative suggestion, he has called for Canada to become the “Fifty First State,” arguing that this would eliminate all tariffs and trade issues, a statement that has outraged Canadian officials.
Following Trump’s announcement, the US stock market experienced a significant decline, raising fears of potential economic downturns. This dip adds pressure on Trump, who has projected himself as a business-savvy leader yet faces criticism for his import taxation strategy, which could undermine the economy instead of fostering growth. He was scheduled to address the Business Roundtable, a group of CEOs, after these troubling market developments, despite his tariffs against several countries risking a substantial tax increase on imports.
Market watchers have voiced concerns about the risk of recession, with predictions from economist Larry Summers estimating a 50% chance due to the ambiguous effects of tariffs on demand and inflation. Investment bank Goldman Sachs has also downgraded its growth forecast, citing increased chances of an economic downturn linked to Trump’s policies.
Despite the mounting anxiety, Trump has attempted to convey optimism regarding the long-term benefits of his tariffs, asserting that they would encourage companies to relocate factories to the US. However, he has acknowledged potential transitional challenges, avoiding definitive statements on the economy’s trajectory.
The lasting impact of these developments remains uncertain, particularly as the S&P 500 index faced notable losses. The administration has highlighted job creation from domestic investments resulting from tariffs, though the significance of these claims may be diluted against the backdrop of a robust job market already evidenced by substantial job additions over the past year.