Ontario announced it would suspend new electricity export charges to some northern US states, backing down after President Trump threatened to raise tariffs on Canada. Doug Ford, the Premier of Ontario, said the province would halt the 25% surcharge following a "productive" discussion with the US Secretary of Commerce, along with the promise of a future meeting.
In response, White House officials confirmed that Trump would also drop his latest tariff threats, which would have targeted the auto industry and doubled tariffs on Canadian steel and aluminum imports. This marked the latest exchange in the ongoing trade dispute between Canada and the US, which has raised concerns about economic consequences for both nations.
"Cooler heads prevailed," said Peter Navarro, Trump's trade advisor, confirming that the president would not proceed with his threatened tariffs.
Canada, a long-standing trade partner of the US, has been a target of Trump's aggressive trade policies, including a blanket 25% tariff on goods from Canada and Mexico. However, Trump temporarily exempted many products from these new duties, claiming they were a response to drug trafficking and illegal immigration from both countries.
In addition to these tariffs, Canada faces a 25% duty on its steel and aluminum, set to take effect Wednesday after Trump ended previous exemptions granted to certain nations. Canada has called these measures unjustified and retaliated with its own tariffs on US goods worth C$30 billion ($22 billion, £16 billion).
In response to these trade tensions, Premier Ford had threatened to tax electricity exports to the US in an effort to get the tariffs removed. He also warned he would consider completely halting electricity exports if the situation escalated further.
In his announcement to suspend the electricity charges, Ford explained that it was "the right decision" to refocus discussions on the broader North American Free Trade Agreement (NAFTA) negotiations. "At some point in any negotiation, both parties get heated, and the temperature needs to cool down," he said, thanking US Commerce Secretary Howard Lutnick for initiating a meeting. "We both agreed that cooler heads must prevail. We need to sit down and move forward."
Earlier on Tuesday, Trump had used social media to threaten doubling tariffs on Canadian steel and aluminum in retaliation for Ford's moves. Trump also criticized Canada for relying on the US for military protection and reiterated his suggestion that Canada should become the 51st US state, stating this would eliminate all tariffs and other trade barriers.
The White House called the outcome a victory, claiming that Trump's tactics had once again leveraged the strength of the American economy to secure a win for the US people.
As tensions rose, global stock markets suffered. The S&P 500 dropped another 0.7% on Tuesday after losing 2.7% on Monday, marking its biggest one-day decline since December. The UK’s FTSE 100 index, already down earlier in the day, fell further after Trump’s comments, closing over 1% lower. The French CAC 40 and German DAX indexes also followed similar trends.
Monday’s market drop had begun after Trump referred to the economy as being in a "transition" when asked whether a recession was imminent. Investors expressed concern over the economic impact of Trump's trade policies, fearing they could lead to higher inflation in the US and worldwide, while creating uncertainty that hampers economic activity.
Even before Trump's latest comments, businesses in the US were already feeling the effects of his tariffs. Jason Goldstein, the owner of Icarus Brewing, a small brewery in New Jersey, shared that his suppliers had been warning of price hikes for key ingredients like grain and aluminum cans. In response, Goldstein stockpiled extra supplies and delayed new purchases, fearing further uncertainty.
"It’s a worrying time for us," Goldstein said. "I’ve never had to follow the news so closely to understand what’s happening in my industry the next day."
