U.S. President Donald Trump has stated that he will increase tariffs on Canadian steel and aluminum from the originally planned 25% to 50%, escalating the trade war with the northern neighbor. This move undoubtedly intensifies trade tensions between the U.S. and Canada, raising concerns from all sectors about the future economic direction.
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03-12, 2025Trump claims that this tariff increase, which will take effect on Wednesday, is in response to the Ontario government's raising of prices for electricity exports to the United States. He believes that Ontario's electricity price increases harm U.S. interests, thus necessitating countermeasures.
Trump posted on Truth Social on Tuesday, "I have instructed my Secretary of Commerce to add an additional 25% tariff on all Steel and Aluminum products coming into the U.S. from Canada, reaching 50%. Canada is one of the highest tariff countries in the World." These remarks further intensified the conflict between the two countries, escalating the trade conflict.
The U.S. President gave multiple explanations for the confrontation with Canada, including claiming the separate 25% tariff was related to fentanyl smuggling, and objecting to Canada's high tariffs on dairy imports, which hurt American farmers. However, he continued to call for Canada to become part of the U.S. as a solution, a form of mockery that infuriated Canadian leaders.
"The only thing that makes sense is for Canada to become our cherished 51st State," Trump posted on Tuesday. "It would end all Tariffs, and everything else, completely."
U.S. stocks fell rapidly after Trump's social media posts, with the massive sell-off on Monday sparking further concerns, putting pressure on Trump to come up with a legitimate economic growth plan, rather than one that could push the economy into recession.
Trump was scheduled to address the Business Roundtable, a trade association of chief executive officers, on Tuesday afternoon, attracting them during the 2024 campaign with promises of lower corporate tax rates for domestic manufacturers. But his tariffs on Canada, Mexico, China, steel, aluminum—and plans for potentially more tariffs on Europe, Brazil, South Korea, pharmaceuticals, copper, lumber, and computer chips—would amount to a massive tax increase.
The stock market's vote of no confidence over the past two weeks has put the president in a dilemma: on the one hand, his enthusiasm for taxing imported goods, and on the other, his brand as a businessman-savvy politician, based on his own experience in real estate, media, and marketing.
Harvard economist and former Treasury Secretary in the Clinton administration, Larry Summers, said on Monday that the odds of a recession are 50-50.
"All the emphasis on tariffs and all the ambiguity and uncertainty both suppresses demand and raises prices," Summers posted on X.
"We are facing the worst of all worlds - inflation and recession worries, and more uncertainty about the future that slows everything down."
Investment bank Goldman Sachs lowered its growth forecast for this year to 1.7% from a previous 2.2%. It slightly increased the probability of a recession to 20%, "because the White House could choose to unwind policy adjustments if downside risks start to appear more serious."
Trump had tried to reassure the public that his tariffs would only bring a little "transition" to the economy, and that these taxes would prompt more companies to start moving factories to the United States to avoid tariffs, a process that would take years. But he sounded the alarm in an interview that aired on Sunday, and he did not rule out the possibility of a recession.
"I don’t like predicting things like that," Trump said on Fox News Channel’s _Sunday Morning Futures_ program. "There’s a transition period, because what we’re doing is so important. We’re bringing wealth back to the United States. It’s a big thing. And there are always going to be some periods — it takes a little while. It takes a little while. But I don’t — I think it should be great for us. I mean, I think it should be great."
The promise of a bright outlook did not dispel anxiety, with the S&P 500 falling 2.7% on Monday, a clear Trump-style slump, wiping out the gains the market had made when he won in November 2024. The S&P 500 fell about 0.4% in trading on Tuesday morning.
The White House emphasized after the market closed on Monday that tariffs are prompting companies like Honda, Volkswagen, and Volvo to consider new investments in U.S. factories.
It issued a statement saying that Trump's combination of tariffs, deregulation, and increased energy production has led industry leaders to pledge "thousands of new jobs."
The significance of thousands of additional jobs is unclear, as the U.S. economy added 2.2 million jobs last year alone, according to the U.S. Bureau of Labor Statistics.
