In a dramatic escalation of trade tensions, US President Donald Trump announced on Tuesday (March 11) that tariffs on Canadian steel and aluminum imports could be doubled to 50 percent.
The move came in response to Ontario Premier Doug Ford’s threat to impose a 25 percent surcharge on electricity exports to the US, a measure that would affect about 1.5 million homes in New York, Michigan and Minnesota.
Ford’s proposal was aimed at pressuring Trump to withdraw existing tariff threats against Canada.
Instead, the American leader ramped the situation up further.
Trump took to his Truth Social platform to confirm his directive to Secretary of Commerce Howard Lutnick, stating that all imported steel and aluminum from Canada will now face 50 percent tariffs.
He reiterated his longstanding grievances over Canadian trade protections, particularly in the dairy and automotive sectors, and warned that auto tariffs will also increase unless Canada eliminates “other egregious, long-time tariffs.”
“Why would our Country allow another Country to supply us with electricity, even for a small area? Who made these decisions, and why?” Trump wrote, adding that Canada will pay a high financial price for its actions.
Ontario’s premier was defiant in the face of Trump’s retaliatory move.
Speaking to MSNBC, Ford said, “We will not back down. We will be relentless. I apologize to the American people that President Trump decided to have an unprovoked attack on our country.”
However, in a surprising turn of events, Ford announced the same evening that he would suspend the planned 25 percent surcharge on electricity exports to the US after discussions with Lutnick.
The two sides agreed to meet on Thursday (March 13), alongside members of the Office of the US Trade Representative, to discuss a renewal of the US-Mexico-Canada Agreement before the auto tariff deadline on April 2.
“In response, Ontario agreed to suspend its 25 percent surcharge on exports of electricity to Michigan, New York, and Minnesota,” Ford said in a statement posted on X, formerly Twitter.
Trump responded positively to the move and hinted at a potential softening of his stance on tariffs. “Probably so,” he told reporters when asked if he would consider lowering the 50 percent tariffs. “I’ll let you know.”
Following Ford’s announcement, major stock indexes rallied, reversing some of the day’s earlier losses.
The escalation comes at a precarious moment for Canada.
Prime Minister Justin Trudeau is in the process of stepping down, and while his successor Mark Carney is set to formally assume office this week, he has been unable to engage with Trump directly until officially sworn in.
Market and business fallout
Trump’s decision has already had far-reaching consequences in financial markets.
The S&P 500 (INDEXSP:.INX) slid more than 1 percent on Tuesday (March 11), while Canada’s S&P/TSX Composite Index (INDEXTSI:OSPTX) fell by 0.6 percent on the same day.
For its part, the Canadian dollar dropped to a one week low against the US dollar. Meanwhile, the price of aluminum in the US physical market soared to a record high above US$990 per metric ton in response to the tariffs.
Broader 25 percent tariffs on all steel and aluminum imports to the US from other countries will take effect on Wednesday (March 12). Additionally, Trump has threatened further tariffs on auto imports by April 2, creating significant uncertainty for manufacturers and businesses that rely on cross-border trade.
CEOs of major American firms were set to meet with Trump late on Tuesday, but it remains unclear whether they will challenge the president’s aggressive trade policies.
With negotiations set for later this week and further tariffs looming, the trade standoff between the US and Canada remains volatile. Whether the two sides can de-escalate tensions before the April 2 auto tariff deadline remains uncertain, but for now, businesses and consumers are bracing for further economic disruption.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.