Trump Pulls Back On 50% Tariffs Threat To Canada After Ontario Suspends Electricity Price Hikes

Last Updated:March 12, 2025, 07:35 IST

President Trump backed down from escalating tariffs on Canadian steel and aluminum, leading Ontario to pause electricity surcharges to the US. Officials will renegotiate the USMCA treaty on Thursday.

US President Donald Trump (Picture credit: AP)

US President Donald Trump backed down from his threats to impose a 50% tariff on Canadian steel, aluminum, and electricity after Ontario announced it would suspend surcharges on electricity exports to the US.

After a day of intense market fluctuations triggered by escalating tariff threats, US Commerce Secretary Howard Lutnick, Canada’s Finance Minister Dominic LeBlanc, and Ontario Premier Doug Ford confirmed they would meet on Thursday to discuss renegotiating the USMCA trade agreement.

Ontario’s decision to suspend its 25% surcharge on electricity exports to Michigan, Minnesota, and New York marked a de-escalation in the trade tensions. Earlier on Tuesday, President Trump had escalated the situation by threatening a 50% tariff on Canadian aluminum and steel, citing Ontario’s electricity surcharge as retaliation. However, Trump later signaled he would ease his stance.

When asked about the tariff threat at a White House event, Trump avoided a direct answer, saying, “I’ll let you know." Shortly afterward, White House senior counselor Peter Navarro confirmed in a CNBC interview that the 50% tariff would not be implemented.

Instead, 25% tariffs on all imported steel and aluminum, including from Canada, will take effect at midnight Wednesday, according to a statement from White House spokesperson Kush Desai.

Trump indicated that these tariffs might increase further, suggesting, “The higher it goes, the more likely it is they’re going to build," referring to companies potentially moving production to the US

Market Reactions

The markets initially dropped sharply in response to Trump’s 50% tariff threat on Canadian metals, but losses were trimmed following the joint announcement by Lutnick and Ford. The Dow Jones ended the day down by 478 points (1.1%), while the broader S&P 500 fell 0.8%, nearing correction territory. The Nasdaq Composite also dropped 0.2%, deepening its correction.

Tit for Tat: Trump’s Retaliation

Earlier, Trump had threatened to match Ontario’s 25% surcharge on electricity with a similar tariff on Canadian electricity, which would have raised utility bills for U.S. customers by up to $100 a month. Additionally, Trump proposed imposing higher tariffs on Canadian aluminum and steel as a countermeasure.

Trump tweeted, “Based on Ontario, Canada, placing a 25% Tariff on ‘Electricity’ coming into the United States, I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA."

Ontario Premier Doug Ford responded by threatening to halt electricity exports to the U.S. entirely. Mark Carney, Canada’s next leader, vowed to continue applying pressure on the U.S. in response to Trump’s tariffs.

“My government will keep our tariffs on until the Americans show us respect and make credible, reliable commitments to free and fair trade," Carney posted on X before Lutnick and Ford’s announcement. White House Press Secretary Karoline Leavitt confirmed that Trump had not yet spoken with Carney but reiterated that the president’s line of communication remained open.

Trump had also hinted at declaring a national electricity emergency in states affected by Ontario’s surcharge, calling it a low blow for Canada to use electricity as a bargaining chip. Meanwhile, he continued to threaten substantial tariffs on cars from Canada, set to begin on April 2.

The Impact on the US Economy

While Trump’s tariffs are aimed at punishing Canada, the move could backfire, damaging the U.S. economy as well. Canada is the U.S.’s top supplier of steel and aluminum, with imports valued at $11.4 billion in aluminum and $7.6 billion in iron and steel last year, according to U.S. Commerce Department data. Canadian aluminum accounted for 41% of all U.S. aluminum imports, and Canadian steel represented nearly a quarter of U.S. imports.

A 25% tariff on Canadian aluminum alone could result in a loss of 100,000 jobs in the U.S., according to Alcoa, one of the largest aluminum producers. The aluminum industry directly employs 164,000 Americans and indirectly supports another 272,000 jobs in related sectors like mining and manufacturing.

Former Treasury Secretary Larry Summers criticized the tariff threats, calling them “the worst trade policy yet" and a self-inflicted wound that could worsen recession risks. In contrast, United Steelworkers president David McCall argued that while trade abuses by China and other nations deserve attention, Canada has long been a reliable ally and should not be treated as a trade adversary.

Wider Implications for the U.S. Manufacturing Sector

Aluminum and steel are essential materials for a wide range of products, including cars, appliances, machinery, and medical devices. If tariffs on these metals are imposed, it could significantly raise prices for American consumers. Cars, which rely heavily on steel and aluminum, could be particularly impacted, with Trump’s auto tariffs likely to affect U.S. manufacturers more than Canadian ones due to the intertwined North American supply chain.

In addition, appliances, infrastructure, and power lines, all of which depend on these metals, could see increased production costs. Trump’s move to raise tariffs on Canadian products threatens to disrupt these industries and potentially harm the American economy more than Canada’s.

News world Trump Pulls Back On 50% Tariffs Threat To Canada After Ontario Suspends Electricity Price Hikes