President of the United States Donald Trump on Tuesday, March 11, announced that he would raise tariffs on steel and aluminum imported from Canada to 50% in response to the decision of the province of Ontario to increase taxes on electricity sent to the US.
The tariff growth announced by Mr. Trump is the next stage in the economic confrontation between Washington and one of its largest trading partners, Ottawa. In a social media post, the President of the United States announced that new US trade policy measures against Canada will take effect on Wednesday, March 12. The planned 25% tariff on metals will be activated immediately after midnight. As noted by the media, Donald Trump’s decision doubles the rate for Canada.
Mr. Trump also said that on April 2, he would significantly increase tariffs on automobile parts imported from Canada if Ottawa did not reduce levies on dairy products and other goods from the United States.
According to the US president, the mentioned move would essentially, permanently shut down the Canadian automotive business. Also in this context, Donald Trump once again repeated his statement that Canada should become part of the United States. He noted that the materialization of the corresponding scenario, providing changing borders on the map of North America, will mean the disappearance of tariffs and everything else.
The media noted that Donald Trump’s decision to raise levies on steel and aluminum imported from Canada would have sensitive negative consequences for US businesses. In this context, it is worth mentioning that Ottawa is the main source of aluminum for the United States industry. It is also noteworthy that the car factories that Donald Trump is threatening to shut down are owned by US manufacturers.
Washington’s tightening of trade policy towards Ottawa means an escalation of the confrontation between the United States and its northern neighbor in the context of trade relationships. Against the background of the new phase of the relevant process, the situation in the markets may worsen, which are already showing steady losses after Donald Trump moved forward with an initial round of tariffs against Canada and Mexico last week.
US stock indexes were down after Mr. Trump announced that he would double the tariffs. The S&P 500 Index fell 1.22%. The Dow Jones Industrial Average showed a decline of 1.49%. The Canadian dollar fell to a one-week low amid news of Washington’s tightening trade policy towards Ottawa.
Canadian Prime Minister-Designate Mark Carney said in a social media post that Donald Trump’s latest tariffs are an attack on Canadian workers, families, and businesses. He also noted that his government will ensure that the response from Ottawa has the maximum impact in the United States and has the minimum effect in Canada while supporting the affected workers.
On Tuesday, White House Press Secretary Karoline Leavitt said that Donald Trump decided to double tariffs based on what the US saw as egregious and insulting comments from Ontario Premier Doug Ford, who announced that he would add a surcharge for Canadian energy sent to the United States in response to some of the levies that have already entered into force.
Currently, trading is becoming more volatile and unpredictable. This order of things, which can already be described as a kind of formed reality, is facilitated by the tariff policy of the Donald Trump administration and retaliatory measures from capitals facing tougher conditions for economic cooperation with Washington.
According to media reports, citing anonymous insiders, industry experts supporting Mr. Trump’s mentioned decisions were taken off guard on Tuesday morning. This means that the President of the United States did not discuss the doubling of tariffs before publicly announcing the implementation of the relevant measure.
The current concept of Donald Trump’s trade policy differs significantly from the strategy that was applied in his first term as president. At that time, tariffs were widely threatened. In Mr. Trump’s first term, these measures were imposed primarily on China and certain sectors, including steel and aluminum. This was stated by Marc Short, who served as chief of staff to Vice President Mike Pence in Donald Trump’s first term.
At the beginning of his second term, Mr. Trump imposed 25% tariffs on goods imported from Canada and Mexico. Then he delayed this move by one month. The tariffs came into effect last week. After that, Donald Trump exempted some goods from the action of the specified measures. In this case, it refers to products subject to the USMCA, the North American free trade agreement, which Mr. Trump concluded during his first term.
The next wave of tariffs may come as early as April. Donald Trump plans to impose reciprocal duties, which, in his opinion, are equivalent to tariffs of other countries, non-tariff barriers, and some taxes, including a general sales tax of 5% in Canada, applied to almost all purchases within the country.
It is worth noting that Mr. Trump has repeatedly complained about Canada’s dairy tariffs, which are part of the country’s protected system of production quotas known as supply management.
Ottawa has already responded to Washington’s tightening trade policy with a series of retaliatory measures. In this context, one of the most notable decisions was a 25% surcharge on electricity sent to Minnesota, Michigan, and New York from Ontario. This retaliatory measure from Ottawa could potentially become a factor in increasing price pressure on Americans, whose budgets are already strained due to persistent inflation.
According to media calculations based on data from the state’s electricity grid operator, in 2023, New York imported about 4.4% of its total electricity from Canada. Data from the Midcontinent Independent System Operator, the region’s grid operator, suggests that the mentioned indicator is even lower in Michigan and Minnesota.
The Canadian federal government has also imposed tariffs on items such as American orange juice, footwear, and motorcycles.
Doug Ford, one of the country’s prominent conservative politicians, has enacted electricity tariffs amid widespread outrage over Donald Trump’s statements that Canada should become part of the United States. On Tuesday, he announced his desire to maintain electricity flows to the US, which at the same time does not negate the willingness to cut off these exports if Washington continues the trade war.
Donald Trump said he would declare a national emergency on electricity in the region. According to him, this move will allow the United States to quickly do what is necessary to alleviate the abusive threat from Canada.
It is worth noting that Mr. Trump already declared a nationwide energy emergency on his first day in office. In this case, the opportunity was opened to leverage special and little-used subsidies in federal law in new ways to propel the construction of pipelines, power lines, and other projects.
In areas of the United States that currently receive electricity from Ontario, the Donald Trump administration could potentially use powers to press coal power plants into more service, potentially accelerate new generation projects, or enable swifter permitting and construction of electrical transmission infrastructure.
As we have reported earlier, China Hits US Agriculture Amid Tariff Confrontation.
