In a dramatic twist in international trade negotiations, President Donald Trump has withdrawn his threat to double tariffs on Canadian steel and aluminum after a prompt policy reversal by Ontario's government.
The Associated Press reported that the cancellation of increased tariffs followed Ontario’s decision to halt planned electricity surcharges.
President Trump initially announced on Tuesday that he would raise tariffs from 25% to 50% on steel and aluminum imports from Canada.
This aggressive move was aimed at pressuring Canada over various grievances, including drug smuggling and high taxes on U.S. dairy.
Reacting to Trump’s tariff threat, the Provincial Government of Ontario swiftly suspended its upcoming surcharges on electricity that would affect the U.S. markets. This suspension was crucial in Trump's decision to maintain the tariffs at their original level of 25%, starting from Wednesday.
Ontario Premier Doug Ford played a pivotal role by discussing the matter with U.S. Commerce Secretary Howard Lutnick.
Ford's willingness to engage in constructive conversations was evident when he remarked, “By no means are we just going to roll over. What we are going to do is have a constructive conversation.”
Amid these negotiations, Trump also made a provocative suggestion that Canada should become the fifty-first state of the United States, a statement that would eliminate all tariffs between the two nations. His remark was met with various reactions and was indicative of his unconventional approach to diplomacy and trade.
President Trump defended the existing tariffs as beneficial. During a session with the Business Roundtable, he argued, “The tariffs are having a tremendously positive impact — they will have, and they are having.”
Incoming Canadian Prime Minister Mark Carney responded to the U.S. tariff strategy by stating that Canada would maintain its retaliatory 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 asserted.
The backdrop to these trade disputes was a volatile stock market, which saw significant declines with the S&P 500 falling 2.7% on Monday and about 0.8% on Tuesday following the tariff announcements and electoral declarations.
Experts warned that escalating tariffs could increase the risk of a recession, as trade tensions typically do. The financial markets were closely monitoring the developments, reflecting concerns over global economic stability.
Trump has consistently used tariffs as a tool in his broader strategy to address trade imbalances and other issues such as drug trafficking and illegal immigration.
He temporarily suspended additional tariffs on Mexico, contingent on their compliance with the USMCA, demonstrating a pattern of using tariff threats as leverage in diplomatic negotiations.
In a rally in Pennsylvania, Trump starkly stated the stakes of his electoral success tied to economic policies: “If I don’t win you will have a 1929 style depression. Enjoy it.”
With the immediate crisis averted, both U.S. and Canadian officials are likely to continue negotiations to reach a more stable and mutually beneficial trade agreement. The dynamics of these negotiations will be crucial as both nations seek to protect their economic interests while managing political and public expectations amidst global economic uncertainties.