U.S.-Canada trade tensions escalate as Trump boosts, then retracts metal tariffs

U.S. President Trump abruptly reversed his earlier commitment to raise tariffs on Canadian imports of steel and aluminum to 50%. This decision, announced just hours after his initial statement, caused significant volatility in financial markets. The shift in Trump's stance stemmed from a Canadian official abandoning a plan to impose a 25% surcharge on electricity.

Trump's recent actions have shaken financial markets and reignited concerns about inflation. This followed Ontario Premier Doug Ford's announcement that he would levy a fee on electricity supplied to over one million American households unless Trump rescinded his threat to impose tariffs on Canadian exports to the United States.

Faced with Trump's impending threat of a 50% tariff, Ford decided to suspend the surcharge and agreed to meet with U.S. Commerce Secretary Howard Lutnick in Washington on Thursday. The White House subsequently announced that the previously announced 25% tariffs on steel and aluminum products from Canada and all other countries would take effect on Wednesday, without any exceptions or exemptions.

White House spokesman Kush Desai stated, "President Trump has once again used the leverage of the American economy, the best and biggest in the world, to win for the American people. Pursuant to his prior executive orders, the 25% tariffs on steel and aluminum, without any exceptions or exemptions, will take effect at midnight on March 12th on Canada and all our other trading partners."

The ongoing back-and-forth negotiations between the U.S. and Canada have further disrupted financial markets, which were already uneasy due to Trump's focus on tariffs. Stocks initially plummeted after Trump's initial post on Truth Social, but they recovered somewhat after Ford announced he would suspend the surcharge and Ukraine agreed to a 30-day ceasefire.

The S&P 500 at one point fell to 5528.41 points, briefly dipping below the 10% threshold from its February 19th closing record high of 6144.15 points, a situation known as a market correction. Since Trump took office on January 20th, the U.S. stock market has experienced a significant decline from its all-time high about a month later, leading to a nearly $5 trillion loss in the value of U.S. indices.

Trump triggered the sell-off with a message on his Truth Social platform, announcing that he had instructed Lutnick to impose an additional 25% tariff on metal products imported from Canada, which would take effect on Wednesday, in addition to the existing 25% tariffs on all steel and aluminum products imported from other countries.

He also targeted Canada's trade protectionism on dairy and other agricultural products, threatening to "substantially increase" car tariffs entering the U.S., scheduled to take effect on April 2nd, if Canada did not eliminate other "outrageous long-term tariffs."

Despite the market volatility, Trump remained unfazed, telling reporters that the stock market goes up and down, but he emphasized the need to rebuild the economy.

Encouraged by Ontario's decision, Trump hinted that tariffs could be further increased, thereby forcing countries to move manufacturing to the United States. He insisted that tariffs would "bring massive amounts of money into this country," stating, "The higher the tariffs, the more likely they are to build plants... The biggest win is not the tariffs. The tariffs are a big win. It's a lot of money. But the biggest win is they move into our country and create jobs."

This escalation of the trade conflict comes as Canadian Prime Minister Justin Trudeau prepares to hand over power to his successor, Mark Carney, later this week, who recently won the leadership race for the ruling Liberal party.