He has levied 25% taxes on goods from Canada and Mexico, postponed them for a month, and then allowed them to go into effect last week. A few days later, he granted exclusions that might cover the majority of commerce with those nations.
Hours after threatening Canada with a new trade war, President Donald Trump backed down, downplaying the possibility of a tariff-driven recession that has plunged US markets.
During his wild day, Trump threatened to boost taxes on Canadian steel and aluminum to 50% after Ontario stated that it would impose a fee on power delivered to the US. However, once the provincial government backed down, he reverted to his initial plans for a 25% rate.
The episode captured the chaotic and erratic tariff onslaught that has alarmed investors and confused business executives over the last six weeks, and it shook markets that were already preparing for the global metal taxes that would take effect at midnight. Major stock indices were down roughly 10% from their peak due to growing worries that the largest economy in the world might be set to stall. As recently as Sunday, Trump himself fanned the recession debate by refusing to rule it out in an interview with Fox News.
When questioned about if he was concerned about a dip at the White House late Tuesday, he struck a more positive tone. “No, I don’t see it. This country is going to flourish, in my opinion,” he remarked. Furthermore, he downplayed the market downturn. According to Trump, they are “going to go up and they’re going down.” “That doesn’t worry me.”
However, a few hours later, he warned top businessmen attending a Business Roundtable meeting to prepare for additional tariffs, stating that rates might even rise. The president claimed that higher taxes just made it “more likely” for businesses to relocate their operations within the United States.
According to Trump, “the biggest win is not the tariff — that big win is a lot of money — but the biggest win is if they move into the country and produce.”
Although other Trump proposals, such as the possibility of mass deportations and Elon Musk’s plans to cut federal spending and jobs, could also jeopardize US development, risk assessments have focused mostly on the growing trade war. According to economists, it will increase consumer prices, damage US exporters in retaliation, and ultimately slow GDP.
The United States’ largest trading partners are China, Mexico, and Canada, the three main targets to date. The latter was the target of attention on Tuesday.
Trump warned to quadruple his northern neighbor’s metals charge, seemingly incensed at Canada’s plans to counter with duties on US dairy products and other items as well as higher pricing for energy exports. In addition, he threatened to enact drastic new tariffs if Ottawa didn’t change some of its own protectionist measures meant to safeguard the nation’s dairy sector.
In essence, Trump claimed, the upcoming taxes will “shut down the automobile manufacturing business in Canada forever.”
After a few hours, Ontario Premier Doug Ford and Trump’s Commerce Secretary Howard Lutnick announced that they would meet in Washington on Thursday and that the province will halt its plans to impose an electricity fee.
“The president, who is the best dealmaker ever, has to say, ‘Here’s my response,’ when you’re negotiating with someone and they’re not paying attention and they disagree,” Lutnick stated in a CBS News interview.
Following that, US equities reduced their losses, although the S&P ended the day down.
It’s probably just a temporary break in the trade war escalation, as a 25% tariff on steel and aluminum imports is scheduled to go into effect at midnight, and there will be a slew of them starting next month. This includes “reciprocal” duties, which are equivalent to what the US considers to be trade barriers imposed by other nations, as well as distinct tariffs on a variety of particular goods, ranging from lumber to automobiles and semiconductors.
Markets and business are finding Trump’s second-term trade war particularly disruptive due to its erratic and changing character and the degree to which decisions are left up to the president’s whims.
He has levied 25% taxes on goods from Canada and Mexico, postponed them for a month, and then allowed them to go into effect last week. A few days later, he granted exclusions that might cover the majority of commerce with those nations.
Marc Short, the former chief of staff to Vice President Mike Pence, stated, “It’s drastically different than the first administration.” “One of the most difficult things is that when markets see it, they think it’s just part of his bluster, don’t they?” Short uttered those words. “That it is merely a negotiation.” It’s not, either.
Business executives have been voicing concerns. Aluminum is primarily imported from Canada for US industry, and US automakers own a number of the Ontario-based auto facilities that Trump threatened to close.
In his speech to Congress last week, Trump admitted that there would be some disruption as a result of the significant economic reform he is pursuing to reduce the role of the federal government and restore manufacturing jobs to the US. Additionally, aides like Treasury Secretary Scott Bessent have hinted that there will be some suffering.
Trump’s tariffs might be exacerbated if other nations retaliate. New York is among the states to which Ontario sells power, so more taxes would put further burden on US household budgets already squeezed by ongoing inflation.
There is no immediate prospect of a US recession, according to most analysts. Some warning signs, however, include a rise in small business uncertainty and a decline in consumer sentiment and expenditure. The economy as a whole continued to hire last month, but the unemployment rate increased slightly to 4.1%. Another employment danger is increased by Musk’s attempts to reduce the government bureaucracy.
Trump defended the idea once more on Tuesday, claiming it will boost the private sector.
