Trump backtracks 50 percent tariff on Canadian metals but 25 percent import tax to go into effect

Less than a day after American stock markets had their worst one-day performance in years as a result of Donald Trump’s continued push to raise import taxes on goods from America’s biggest trading partners, the president threatened to double down on tariffs he has already placed on aluminum and steel imports from Canada but later reversed himself and ordered previously announced 25 percent taxes to go into effect at midnight.

In a statement, White House spokesperson Kush Desai said a 25 percent tax all on steel and aluminum “for Canada and all of our other trading partners” would be implemented on Wednesday “with no exceptions or exemptions.”

The White House announcement represented a backtracking and retrenchment of sorts for Trump, who earlier in the day had said he was ordering the 25 percent tax he had already announced on any imported aluminum or steel from Canada to be raised to 50 percent — one that will be paid by importers and likely passed on to consumers in the form of higher prices.

The impetus for the threatened 50 percent import tax taxes, which had been set to into effect Wednesday morning, was a 25 percent surcharge that Canadian electricity exporters had briefly placed on power delivered over a shared grid used by a group of American states.

“I will shortly be declaring a ‘national emergency on electricity’ within the threatened area. This will allow the US to quickly do what has to be done to alleviate this abusive threat from Canada,” Trump wrote.

He also demanded that Canada drop a host of longstanding trade barriers, including one on dairy products, and threatened to charge Americans higher import taxes on cars and car parts that are entirely or partially made in Canada starting on 2 April.

But just hours after Trump threatened additional tariffs, Ford, Ontario’s conservative provincial leader, said he would suspend the Canadian province’s 25 percent electricity surcharge on the United States on Tuesday afternoon, citing what he called a “productive conversation” about the economic relationship between Canada and the U.S. with Secretary of Commerce Howard Lutnick.

He also said Lutnick had agreed to meet with him and the U.S. Trade Representative in Washington, D.C., on Thursday, when they would discuss a renewed United States-Mexico-Canada Agreement, the free trade agreement between the North American countries that is up for renegotiation next year.

In response to that, Ford agreed to suspend the increased tax on electricity.

Asked whether he would respond by cancelling the tax increases on aluminum and steel imports during an impromptu event on the White House South Lawn on Tuesday, Trump told reporters: “I’m looking at that, but probably so — I’ll let you know about it.”

Desai’s statement came roughly one hour later. The White House spokesperson credited Trump for forcing Ford to withdraw the surcharge and said the president had “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.”

In his post threatening the tax increases on metal imports, Trump had said the tariffs, which would likely be paid by Americans who purchase cars, would “essentially, permanently shut down the automobile manufacturing business in Canada” and claimed that the cars in question, which are built and sold by American firms including General Motors, “can easily be made in the USA”.

The tax increases on imports are the latest in a series of levies the president has announced in recent weeks as he has, without provocation, instigated a trade war with a longtime ally that has roiled financial markets and sent America’s economy hurtling downwards towards what economist say could be a crippling recession.

At a briefing with reporters later on Tuesday, White House Press Secretary Karoline Leavitt said Trump’s decision to increase the taxes on the metal imports from Canada was a “retaliatory statement due to the escalation of rhetoric that we’ve seen out of Ontario.”

Leavitt called Ford’s comments “egregious and insulting” and said Trump “has an obligation and a responsibility to respond accordingly and represent the interests of the American people.”

“So he has made the decision to add a 25 percent tariff. So now steel and aluminum tariffs will come into effect tomorrow at the rate of 50 percent,” she said.

Pressed on whether Canada, a charter member of NATO whose soldiers stormed the beaches of Normandy alongside American troops during the allied invasion of France in 1945, remains an close ally of the United States, Leavitt notably refused to say.

“I think Canada is a neighbor. They are a partner. They have always been an ally. Perhaps they are becoming a competitor now,” she said.

Leavitt added that Trump believes Canadians would “benefit greatly” from giving up their own government and head of state in favor of becoming part of the United States, citing comparatively higher tax rates but failing to mention Canada’s national health care system.

Investor concerns over the possible repercussions of the president’s chaotic tariff war with Canada, Mexico and China sent the stock market spiraling on Monday, with the Dow Jones Industrial Average closing with a near-record loss of 890 points and the Nasdaq average falling by 4.2 percent — the single worst one-day drop since September 2022. The Standard and Poor’s 500 index also fell precipitously, with a closing point below the index’s 200-day moving average for the first time since November 2023.

The selloff continued early on Tuesday in Asian markets as investors around the world grappled with Trump’s erratic maneuvers and his indication during a weekend interview with Fox News that the US economy could be in for a recession.

White House and administration officials have dismissed the rapid stock slides as unpleasant but necessary consequences of what they say is Trump’s push to remake the American economy by re-industrialising and rolling back decades of global economic integration.

One such official said Monday that the administration was “seeing a strong divergence between animal spirits of the stock market and what we’re actually seeing unfold from businesses and business leaders,” with the latter remaining supportive of Trump’s efforts in the official’s rendering of events.

“The latter is obviously more meaningful than the former on what’s in store for the economy in the medium to long term,” the official said.

A White House spokesperson, Kush Desai, downplayed the stock market slump in a statement to reporters in which he stressed that business leaders “have responded to President Trump’s ‘America First’ economic agenda of tariffs, deregulation, and the unleashing of American energy with trillions in investment commitments that will create thousands of new jobs” since he took office in January.

Separately, Treasury secretary Scott Bessent claimed the downturn was a “natural adjustment” as the Trump administration pushes the nation “away from public spending to private spending” and claimed that the American economy had “become hooked, become addicted, to excessive government spending”.

“There’s going to be a detox period,” he added.

Despite the record selloff in U.S. stock markets that has erased all gains made since Trump took office, the president has remained committed to using import taxes as his main took for ushering in what he says will be a “new golden age” in the United States.

Speaking to the Business Roundtable group at its’ quarterly meeting late Tuesday, Trump said his tariffs “are having a tremendously positive impact” and would continue to do so, citing what he said were decisions by automotive manufacturers to bring some assembly work back to American facilities.

“They don’t want to pay 25% or whatever it may be. It may go up higher, maybe go up higher. Look, the higher it goes, the more likely it is they’re going to build and ultimately, the biggest win is not the tariff … the biggest win is if they move into our country and produce jobs. That’s a bigger win than the tariffs themselves,” he said. “But the tariffs are going to be throwing off a lot of money to this country, and we’ve been ripped off for years by other countries, for many, many decades, and they were doing the same thing, but I think we’ll do it better, and I think we have a bigger advantage because we really are the piggy bank they weren’t.”

Trump has spent years touting the supposed benefits of tariffs, which he routinely describes as if they are fees paid by foreign governments as a sort of entry fee for the privilege of accessing American markets.

But tariffs aren’t paid by foreign governments. They’re taxes that are charged to American importers and passed on to American consumers in the form of higher prices for imported goods.

Yet Trump has persisted in claiming that tariffs are paid by foreign governments.

At a press conference last month alongside British prime minister Sir Keir Starmer, he claimed that the fact that tariffs are paid by importers is actually a “myth” that has been “put out there by foreign countries that really don’t like paying tariffs.”

Leavitt repeated a similar lie during her Tuesday briefing after a reporter accurately characterized Trump’s tariffs as tax increases.

“He’s actually not implementing tax hikes. Tariffs are a tax hike on foreign countries that, again, have been ripping us off,” she said.

When the reporter asked if Leavitt had ever had to pay a tariff, citing his own experience having to pay import taxes, she said it was “insulting” for the reporter to have tried to “test [her] knowledge of economics and the the decisions that this President has made.”

Ariana Baio contributed reporting from New York