WASHINGTON (AP) — President Donald Trump said on Tuesday that he will double his planned tariffs on steel and aluminum from 25% to 50% for Canada, escalating a trade war with the northern neighbor and former ally of the United States.
Trump said on social media that the increase in tariffs, which will take effect on Wednesday, is a response to the price increases that the provincial government of Ontario imposed on electricity sold to the United States.
“I have instructed my Secretary of Commerce to add an ADDITIONAL TARIFF of 25%, bringing it to 50%, on all STEEL and ALUMINUM ENTERING THE UNITED STATES FROM CANADA, ONE OF THE NATIONS WITH THE HIGHEST TARIFFS ANYWHERE IN THE WORLD,” Trump posted on Tuesday on his platform Truth Social.
Why did Trump start a trade war against Canada?
The US president has given a variety of explanations for his antagonism towards Canada, stating that their separate 25% tariffs are due to fentanyl smuggling, and has expressed objections to the northern neighbor imposing high taxes on dairy imports that penalize American farmers.
But he continued to ask for Canada to become part of the United States as a solution, a mocking gesture that has angered Canadian leaders.
“The only thing that makes sense is for Canada to become our beloved Fifty-First State,” Trump posted on Tuesday. “This would make all tariffs, and everything else, completely disappear.”
The stocks fall after Trump’s announcement.
Wall Street fell after the announcement, generating more concerns after a brutal sell-off of stocks on Monday that puts Trump under pressure to demonstrate that he has a legitimate plan to grow the economy instead of possibly pushing it towards a recession.
The vote of no confidence from the stock market over the past two weeks puts the president in a dilemma between his enthusiasm for taxing imports and his image as a politician who supposedly understands business based on his own experiences in real estate, media, and marketing.
Harvard University economist Larry Summers, Treasury Secretary during Bill Clinton’s administration, estimates the likelihood of a recession at 50-50.
“All the emphasis on tariffs and all the ambiguity and uncertainty have cooled demand and caused prices to rise,” Summers posted on social media X on Monday. “We are getting the worst of both worlds: concerns about inflation and an economic recession and more uncertainty about the future that slows everything down.”
The investment bank Goldman Sachs revised down its growth forecast for this year to 1.7% from 2.2%. It slightly increased its probability of a recession to 20% “because the White House has the option to reverse policy changes if downside risks start to seem more serious.”
Trump has tried to assure the public that his tariffs would cause a bit of a “transition” to the economy. But he raised alarms in an interview broadcast on Sunday in which he did not rule out a possible recession.
“I hate to predict things like that,” Trump said on Fox News Channel’s “Sunday Morning Futures.” “There is a transition period, because what we are doing is very big. We are bringing wealth back to the United States. That is something big. And it always takes a little time. It takes a little time. But no, I think it should be great for us. I mean, I think it should be great.”
The promise of great things to come did not eliminate anxiety: the S&P 500 stock index fell 2.7% on Monday and 0.4% in Tuesday morning trading.
Why will Ontario charge more for electricity to the United States?
The Premier of Ontario, the leader of the most populous province in Canada, announced that his province will charge 25% more for electricity to 1.5 million Americans in response to the trade war initiated by US President Donald Trump.
Ontario supplies electricity to the states of Minnesota, New York, and Michigan.
“Until the threat of tariffs disappears forever, Ontario will not back down. We will stand firm, use all the tools at our disposal, and do whatever is necessary to protect Ontario,” said Ontario Premier Doug Ford in a statement.