Trump backs down on new tariffs on Canada after Ontario rescinds electricity surcharge

US President Donald Trump reversed his plan to impose sharply higher tariffs on Canadian steel and aluminium after Ontario agreed to suspend its electricity surcharge on exports to the United States.

The decision marks a de-escalation in the trade tensions between the two countries, which had sent financial markets tumbling for a second consecutive day, Caliber.Az reports referring to the latest material by CNN.

In response to Ontario’s 25% surcharge on electricity exports to Michigan, Minnesota, and New York, Trump had earlier threatened to impose a 50% tariff on Canadian steel and aluminium — a dramatic escalation in the ongoing trade dispute. However, following Ontario’s decision to pause its measure, Trump backed down from his threat.

When asked at a White House event on March 11 whether the 50% tariff would still be implemented, Trump deflected, saying, “I’ll let you know.” Shortly afterwards, White House Senior Counselor for Trade and Manufacturing Peter Navarro confirmed in a CNBC interview that the higher tariffs would not take effect.

US Commerce Secretary Howard Lutnick, Canada’s Minister of Finance Dominic LeBlanc, and Ontario Premier Doug Ford announced that they would meet on March 13 to renegotiate parts of the United States-Mexico-Canada Agreement (USMCA) and discuss future trade relations.

Meanwhile, the White House confirmed that existing 25% tariffs on all steel and aluminum imports, including those from Canada, would still take effect at midnight on Wednesday. In an emailed statement to CNN, White House spokesperson Kush Desai added that Trump could still consider increasing the tariffs further in the future.

"It may go up higher," Trump said at an event hosted by the Business Roundtable on March 11. "The higher it goes, the more likely it is they’re going to build," he added, referring to his belief that higher tariffs would encourage companies to move production to the US.

Trump’s announcement of a potential 50% tariff on Canadian aluminium and steel had an immediate impact on financial markets. Stocks initially plummeted following his Truth Social post about the tariff escalation but recovered some losses after the joint statement from Lutnick and Ford signalled de-escalation.

The Dow Jones Industrial Average closed the day down 478 points (1.1%), while the broader S&P 500 fell 0.8%, edging closer to correction territory — a 10% drop from recent highs. The Nasdaq Composite, already in correction, slipped another 0.2%.

Economists have warned that higher tariffs on steel and aluminium could significantly increase costs for American businesses and consumers. The metals are critical to a wide range of industries, including automobiles, appliances, infrastructure, medical devices, and power lines.

Trump’s suggestion that his higher auto tariffs would “shut down” the Canadian auto industry was met with scepticism, as analysts noted that the deeply integrated North American car supply chain means the tariffs could instead disrupt US auto production.

For now, the trade war appears to have cooled, but uncertainty remains over future US-Canada trade relations as both sides prepare for negotiations.

By Tamilla Hasanova