Less than a day after American stock markets had their worst one-day performance in years as a result of Donald Trump’s continued push to raise import taxes on goods from America’s largest trading partners, the president threatened to double down on tariffs he had already imposed on aluminum and steel imports from Canada, but later reversed himself and ordered previously announced 25% tariffs to take effect at midnight.
In a statement, White House spokesperson Kush Desai said a 25% tax on steel and aluminum “for Canada and all of our other trading partners” would go into effect on Wednesday “with no exceptions or exemptions.”
The White House announcement represented a sort of backtracking and retrenchment for Trump, who earlier in the day had said he was ordering the 25% tax he had already announced on any imported aluminum or steel from Canada to be raised to 50% — a tax that importers will pay and will most likely be passed on to consumers in the form of higher prices.
The impetus for the threatened 50 percent import tax, which was set to take effect Wednesday morning, was a 25 percent surcharge that Canadian electricity exporters had temporarily imposed on power delivered via a shared grid used by a group of American states.
“I will shortly declare a ‘national emergency on electricity’ in the threatened area. This will allow the US to quickly address Canada’s abusive threat,” Trump wrote.
He also demanded that Canada remove a number of long-standing trade barriers, including one on dairy products, and threatened to charge Americans higher import taxes on cars and car parts manufactured entirely or partially in Canada beginning April 2.
However, just hours after Trump threatened additional tariffs, Ford, Ontario’s conservative provincial leader, announced on Tuesday afternoon that the Canadian province’s 25% electricity surcharge on the United States would be suspended, citing a “productive conversation” about Canada-US economic relations with Secretary of Commerce Howard Lutnick.
He also stated that Lutnick had agreed to meet with him and the US Trade Representative in Washington, D.C., on Thursday to discuss a renewed United States-Mexico-Canada Agreement, the free trade agreement between the North American countries that is up for renegotiation next year.
In response, Ford agreed to temporarily suspend the increased electricity tax.
When asked if he would cancel the tax increases on aluminum and steel imports during an impromptu event on the White House South Lawn on Tuesday, Trump replied: “I am looking at it, but probably so — I will let you know.”.
Desai’s statement came about an hour later. The White House spokesperson credited Trump with forcing Ford to withdraw the surcharge, stating that the president “once again used the leverage of the American economy, which is the best and biggest in the world, to deliver a win for the American people.”
In his post threatening tax increases on metal imports, Trump stated that the tariffs, which would most likely be paid by Americans who buy cars, would “essentially, permanently shut down the automobile manufacturing business in Canada” and that the cars in question, built and sold by American firms including General Motors, “can easily be made in the USA.”
The import tax increases are the latest in a series of levies announced by the president in recent weeks as he has, without provocation, sparked a trade war with a longtime ally, roiled financial markets, and sent America’s economy hurtling downwards toward what economists predict will be a crippling recession.
At a press briefing later on Tuesday, White House Press Secretary Karoline Leavitt said Trump’s decision to raise tariffs on Canadian metal imports was a “retaliatory statement due to the escalation of rhetoric that we have seen out of Ontario.”
Leavitt described Ford’s remarks as “egregious and insulting” and stated that Trump “has an obligation and a responsibility to respond accordingly and represent the interests of the American people.”
“So he has decided to add a 25% tariff. So the steel and aluminum tariffs will go into effect tomorrow at a 50% rate,” she said.
When asked if Canada, a charter member of NATO whose soldiers stormed the beaches of Normandy alongside American troops during the allied invasion of France in 1945, remains a close ally of the United States, Leavitt declined to answer.
“I believe Canada is a neighbor. They are partners. They have always been an ally. “Maybe they are becoming a competitor now,” she said.
Leavitt went on to say that Trump believes Canadians would “benefit greatly” from abandoning their own government and head of state in favor of joining the United States, citing higher tax rates but ignoring Canada’s national health-care system.
Investor concerns about the potential consequences of the president’s chaotic tariff war with Canada, Mexico, and China sent the stock market into a tailspin on Monday, with the Dow Jones Industrial Average closing with a near-record loss of 890 points and the Nasdaq average falling by 4.2 percent, the single worst one-day drop since September 2022.
The Standard & Poor’s 500 index also fell sharply, closing below its 200-day moving average for the first time since November 2023.
The selloff continued early Tuesday in Asian markets, as investors around the world grappled with Trump’s erratic behavior and his suggestion in a weekend interview with Fox News that the US economy could be in for a recession.
White House and administration officials have dismissed the rapid stock declines as unwelcome but unavoidable consequences of Trump’s push to remake the American economy by re-industrializing and reversing decades of global economic integration.
One such official stated on Monday that the administration was “seeing a strong divergence between animal spirits of the stock market and what we are actually seeing unfold from businesses and business leaders,” with the latter remaining supportive of Trump’s efforts in the official’s interpretation of events.
“The latter is obviously more meaningful than the former on what is in store for the economy in the medium to long term,” according to the official.
Kush Desai, a White House spokesperson, downplayed the stock market decline in a statement to reporters, emphasizing that business leaders “have responded to President Trump’s ‘America First’ economic agenda of tariffs, deregulation, and the unleashing of American energy with trillions in investment commitments that will create thousands of new jobs” since he took office in January.
Separately, Treasury Secretary Scott Bessent claimed that the downturn was a “natural adjustment” as the Trump administration pushed the country “away from public spending to private spending” and that the American economy had “become hooked, become addicted, to excessive government spending.”
“There will be a detox period,” he added.
Despite the record selloff in US stock markets, which has erased all gains since Trump took office, the president has remained committed to using import taxes as his primary tool for ushering in what he calls a “new golden age” in the United States.
Speaking to the Business Roundtable group at its quarterly meeting late Tuesday, Trump stated that his tariffs “are having a tremendously positive impact” and would continue to do so, citing automotive manufacturers’ decisions to bring some assembly work back to American facilities.
“They do not want to pay 25% or whatever the amount is. It could go up higher. Look, the higher it goes, the more likely they are to build, and the biggest win is not the tariff; the biggest win is if they move to our country and create jobs.
“That is a bigger win than the tariffs themselves,” he stated. “But the tariffs are going to be throwing off a lot of money to this country, and we have been ripped off for years by other countries, for many, many decades, and they were doing the same thing, but I think we will do it better, and I think we have a bigger advantage because we really are the piggy bank they weren’t.”
Trump has spent years extolling the supposed benefits of tariffs, which he frequently refers to as fees paid by foreign governments in exchange for the right to enter American markets.
However, foreign governments are not responsible for paying tariffs. They are taxes levied on American importers and passed on to American consumers through higher import prices.
Nonetheless, Trump continues to claim that foreign governments pay tariffs.
At a press conference last month with British Prime Minister Sir Keir Starmer, he claimed that the fact that importers pay tariffs is a “myth” that has been “put out there by foreign countries that really do not like paying tariffs.”
Leavitt repeated a similar lie during her Tuesday briefing, after a reporter correctly described Trump’s tariffs as tax increases.
“He is not implementing tax increases. Tariffs are a tax on foreign countries that have repeatedly ripped us off,” she said.
When the reporter asked if Leavitt had ever had to pay a tariff, citing his own experience with paying import taxes, she said it was “insulting” for the reporter to try to “test [her] knowledge of economics and the decisions that this president has made.”
