U.S. President Donald Trump made a sudden reversal regarding his commitment to increase tariffs on steel and aluminum imported from Canada to 50 percent. This decision came just hours after he announced the higher tariffs, causing significant volatility in financial markets. The change in stance followed a Canadian official’s retreat from plans to impose a 25 percent surcharge on electricity.
Trump’s recent actions, which have shaken financial markets and reignited concerns about inflation, were prompted by Ontario Premier Doug Ford’s declaration that he would impose a charge on the electricity supplied to over 1 million U.S. homes unless Trump rescinded his tariff threats against Canadian exports into the United States.
Negotiations and policy adjustments
Faced with the looming 50 percent tariff threat from Trump, 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 revealed that only the previously announced 25 percent tariffs on steel and aluminum products from Canada and all other nations would be enacted on Wednesday, with no exceptions or exemptions.
“President Trump has 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,” stated White House spokesperson Kush Desai. “Pursuant to his previous executive orders, a 25 percent tariff on steel and aluminum with no exceptions or exemptions will go into effect for Canada and all of our other trading partners at midnight, March 12th.”
The ongoing back-and-forth between the U.S. and Canada has further unsettled financial markets, which were already reeling from Trump’s focus on tariffs. After a steep decline following Trump’s initial post on Truth Social, stocks made a recovery after Ford announced he would suspend the surcharge and Ukraine agreed to a 30-day ceasefire.
Read more: Trade wars deepen as China and Canada retaliate after Trump’s tariffs come into effect
Stock market volatility
The S&P 500 index plummeted to as low as 5,528.41 points, briefly registering a 10 percent drop from its record closing high of 6,144.15 on February 19, a situation referred to as a market correction. U.S. stocks have experienced significant declines since achieving a record high about a month after Trump assumed office on January 20, resulting in nearly $5 trillion in market value being wiped from U.S. indexes.
Trump ignited the selloff with a morning message on his Truth Social platform, announcing he had directed Lutnick to impose an additional 25 percent tariff on metal products imported from Canada, set to take effect on Wednesday, in addition to the existing 25 percent on all imported steel and aluminum products from other nations.
He also took aim at Canada for its trade protections on dairy and other agricultural goods, threatening to “substantially increase” tariffs on cars entering the U.S. that are scheduled to take effect on April 2 “if other egregious, long time tariffs are not likewise dropped by Canada.”
Despite the market fluctuations, Trump remained unfazed, telling reporters that stock markets would experience ups and downs, but emphasized the need to rebuild the economy.
Future implications and manufacturing
Encouraged by Ontario’s decision, Trump suggested that tariff rates could increase further, pressuring countries to relocate their manufacturing to the United States. “The higher it goes, the more likely it is they’re going to build … The biggest win is not the tariffs. That’s a big win. It’s a lot of money. But the biggest win is they move into our country and produce jobs,” he asserted, maintaining that the tariffs would “be throwing off a lot of money to this country.”
The intensification of the trade conflict occurs as Prime Minister Justin Trudeau prepares to transition power this week to his successor, Mark Carney, who recently won the leadership race of the ruling Liberals.
