Trump Reverses 50% Tariff on Canadian Steel, Trade War Rages

Trump Reverses 50% Tariff on Canadian Steel, Trade War Rages

2025-03-12 @ 13:01

Trump Backs Down From 50% Tariff on Canadian Steel, But Trade Tensions Persist

The trade war between the U.S. and Canada continues to intensify, even as former President Donald Trump walks back his threat to double tariffs on Canadian steel and aluminum to 50%. While this decision brings temporary relief, the broader trade conflict between the two nations remains unresolved.

Background: How the U.S.-Canada Trade War Began

The current trade dispute erupted on January 20, 2025, when Trump imposed a 25% tariff on Canadian and Mexican goods, attributing the decision to border security concerns, particularly related to fentanyl. Canada swiftly retaliated, slapping 25% tariffs on $30 billion worth of U.S. exports, effective March 4, 2025.

Recent Developments: Ontario’s Electricity Tariff and Trump’s Response

The situation escalated further when Ontario imposed a 25% surcharge on electricity exports to the U.S., resulting in increased costs for over a million households in Michigan, Minnesota, and New York. Trump’s response was swift—he threatened to raise tariffs on Canadian steel and aluminum from 25% to 50%, effective March 12, 2025.

However, Ontario suspended the electricity surcharge after securing high-level discussions with U.S. trade officials, leading Trump to reverse his decision. The White House later confirmed that tariffs on Canadian steel and aluminum would remain at 25%.

Market Impact: Tariffs Fuel Volatility and Recession Fears

The ongoing trade war is having a significant economic impact on both nations. Key effects include:

Stock Market Volatility: Concerns over tariffs have rattled financial markets, contributing to uncertainty and declines in key indices.

Supply Chain Disruptions: Businesses dependent on cross-border trade are facing logistical challenges and increased costs.

Recession Worries: Economists fear that prolonged trade disputes could push the U.S. into a downturn.

Canada has called the tariffs “unjustified” and is preparing additional punitive measures in response.

Canada’s Counter-Tariffs: The Retaliation Continues

In response to U.S. tariffs, Canada has announced that it will impose or expand countermeasures:

Initial Tariff Package: Canada has already placed 25% tariffs on $30 billion worth of U.S. goods.

Future Tariffs: If the trade war escalates, Canada is prepared to impose tariffs on an additional $125 billion worth of U.S. products.

Affected Products: U.S. exports such as orange juice, peanut butter, wine, spirits, pulp and paper products are already impacted, with potential future tariffs on beef, pork, dairy, fruits and vegetables, electric vehicles, electronics, steel, aluminum, trucks, and buses.

Canada’s Finance Minister Dominic LeBlanc and Foreign Affairs Minister Mélanie Joly have reaffirmed that the country will pursue aggressive countermeasures if the U.S. does not ease its tariff policy.

Future Outlook: More Tariff Hikes on the Horizon?

Despite this temporary truce, tensions remain high. Trump has indicated that tariffs may increase again after April 2, depending on the progress of broader trade negotiations. Ongoing consultations regarding the Canada-United States-Mexico Agreement (CUSMA) will play a crucial role in determining the course of future trade policy.

Canada is actively working with business leaders, provincial governments, and industry stakeholders to mitigate the impact and advocate for the removal of tariffs. However, with countermeasures of up to $155 billion in trade retaliation in play, businesses and consumers in both countries are bracing for further economic turmoil.