President Donald Trump’s threat on Tuesday to double his planned tariffs on steel and aluminium from 25 per cent to 50 per cent for Canada led the provincial government of Ontario to suspend its planned surcharges on electricity sold to the United States.

As a result, the White House trade adviser Peter Navarro said the president pulled back on his doubling of steel and aluminium tariffs, even as the federal government still plans to place a 25 per cent tariff on all steel and aluminium imports starting Wednesday.

The drama on Tuesday delivered a win for Trump but also amplified concerns about tariffs that have roiled the stock market and stirred recession risks.

Tuesday’s escalation and cooling in the ongoing trade war between the United States and Canada only compounded the rising sense of uncertainty of how Trump’s tariff hikes will affect the economies of both countries.

Trump shocked markets Tuesday morning by saying that the increase of the tariffs set to take effect on Wednesday had been a response to the 25 per cent price hike that Ontario put on electricity sold to the United States.

“I have instructed my Secretary of Commerce to add an ADDITIONAL 25 per cent Tariff, to 50 per cent, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD,” Trump posted on Truth Social.

Ontario Premier Doug Ford said on Tuesday afternoon that U.S. Commerce Secretary Howard Lutnick called him and Ford agreed to remove the surcharge. He said he was confident that the U.S. president would also stand down on his own plans for 50 per cent tariffs on Canadian steel and aluminium.

“He has to bounce it off the president but I’m pretty confident he will pull back,” Ford said on Trump’s steel and aluminum tariff threat. “By no means are we just going to roll over. What we are going to do is have a constructive conversation.”

After a brutal stock market selloff on Monday and further jitters Tuesday, Trump faces increased pressure to show he has a solid plan to grow the economy. So far the president is doubling down on tariffs and can point to Tuesday’s drama as evidence that taxes on imports are a valuable negotiating tool, even if they can generate turmoil in the stock market.

Trump suggested Tuesday that tariffs were critical for changing the U.S. economy, regardless of stock market gyrations.

The U.S. president has given a variety of explanations for his antagonism of Canada. He has said that his separate 25 per cent tariffs on all imports from Canada, some of which are suspended for a month, are about fentanyl smuggling and voicing objections to Canada putting high taxes on dairy imports that penalize US farmers.

He also continued to call for Canada to become part of the United States as a solution, which has infuriated Canadian leaders.

“The only thing that makes sense is for Canada to become our cherished Fifty First State,” Trump posted Tuesday. “This would make all Tariffs, and everything else, totally disappear.”

Tensions between the United States and Canada

Incoming Canadian Prime Minister Mark Carney said his government will keep tariffs in place until Americans show respect and commit to free trade after Trump threatened historic financial devastation for his country.

Carney, who will be sworn in as Justin Trudeau’s replacement in coming days, said Trump’s latest tariffs are an attack on Canadian workers, families and businesses.

“My government will keep our tariffs on until the Americans show us respect and make credible, reliable commitments to free and fair trade,” Carney said in a statement.

Canadian officials are planning retaliatory tariffs in response to Trump’s specific steel and aluminium tariffs. Those are expected to be announced Wednesday.

Carney was referring to an initial $30 billion Canadian (US$21 billion) worth of retaliatory tariffs that have been applied on items like American orange juice, peanut butter, coffee, appliances, footwear, cosmetics, motorcycles and certain pulp and paper products.

Trump also has targeted Mexico with 25 per cent tariffs because of his dissatisfaction over drug trafficking and illegal immigration, though he suspended the taxes on imports that are compliant with the 2020 USMCA trade pact for one month.

Asked if Mexico feared it could face the same 50% tariffs on steel and aluminum as Canada, President Claudia Sheinbaum, said “No, we are respectful.”

Trump was set to deliver a Tuesday afternoon address to the Business Roundtable, a trade association of CEOs that during the 2024 campaign he wooed with the promise of lower corporate tax rates for domestic manufacturers. But his tariffs on Canada, Mexico, China, with plans for more to possibly come on Europe, Brazil, South Korea, pharmaceutical drugs, copper, lumber and computer chips — would amount to a massive tax hike.

The stock market’s vote of no confidence over the past two weeks puts the president in a bind between his enthusiasm for taxing imports and his brand as a politician who understands business based on his own experiences in real estate, media and marketing.

Worries about a recession are growing

The investment bank Goldman Sachs revised down its growth forecast for this year to 1.7 per cent from 2.2 per cent previously.

It modestly increased its recession probability to 20% “because the White House has the option to pull back policy changes if downside risks begin to look more serious.”

Trump has tried to assure the public that his tariffs would cause a bit of a “transition” to the economy, with the taxes prodding more companies to begin the years-long process of relocating factories to the United States to avoid the tariffs.

But he set off alarms in an interview broadcast on Sunday in which he didn’t rule out a possible recession.