Donald Trump escalates then defuses trade war with Canada

A major escalation in Donald Trump’s trade war was defused after the Premier of the largest Canadian province suspended a plan to apply a 25 per cent surcharge on electricity to the US.

US President Donald Trump speaks at a business roundtable meeting in Washington. Picture: AFP

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A major escalation in Donald Trump’s trade war was defused after the Premier of the largest Canadian province of Ontario temporarily suspended a plan to apply a 25 per cent surcharge on electricity sent to Michigan, Minnesota and New York.

Mr Trump responded to the proposed electricity surcharge by saying on Tuesday morning local time that he would double the 25 per cent tariffs on steel and aluminium, but withdrew the threat later in the day following Premier Doug Ford’s step-back.

“Can you imagine Canada stopping so low as to use ELECTRICITY, that so affects the life of innocent people, as a bargaining chip and threat?” he said on his Truth Social platform. “They will pay a financial price for this so big that it will be read about in History Books for many years to come.”

The latest instance of tariff whiplash continued to roil markets after Monday’s sell-off, with the S&P 500 teetering on the brink of a market correction by falling 1.5 per cent before recovering to close the day 0.8 per cent lower – nearly 10 per cent below its mid-February peak.

The market turbulence did not deter the Trump administration from confirming it would proceed with the introduction of the President’s across-the-board 25 per cent tariffs on steel and aluminium from midnight Wednesday, with a spokesman confirming there would be “no exceptions or exemptions” for any of the US’s trading partners.

“President Trump has once again used the leverage of the American economy, which is the best and biggest in the world, to deliver a win for the American people,” White House spokesman Kush Desai said

While Mr Trump had threatened to raise tariffs on Canadian steel and aluminium to 50 per cent, he also said he would “permanently shut down the automobile manufacturing business in Canada”.

Incoming Canadian prime minister Mark Carney responded by saying Mr Trump’s threatened tariffs were an “attack on Canadian workers, families and businesses”.

“My government will ensure our response has maximum impact in the US and minimal impact here in Canada, while supporting the workers impacted,” he said.

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

Ontario Premier Doug Ford. Picture: Getty Images

After speaking with Commerce Secretary Howard Lutnick, Mr Ford said he had agreed to temporarily suspend the 25 per cent surcharge on electricity provided by Ontario – the home of Canada’s carmaking industry – to the US and would head to Washington with Canadian Finance Minister Dominic LeBlanc for further talks.

“I thought this was the right ­decision,” he said. “They understand how serious we are about the electricity and the tariffs … We have both agreed that cooler heads prevail. We need to sit down and move this forward”.

Speaking earlier to CNBC, Mr Ford addressed fears that a trade war would trigger an economic downturn and said “there’s one person to be blamed. If we go into recession it will be called the Trump recession – no one else.”

Appearing later at the White House with key adviser Elon Musk, Mr Trump said he was not concerned about US stocks falling and made clear he was intent on pressing ahead with plans to rebuild American industry. He also provided an assurance that he did not see a recession on the horizon, after his refusal to do so over the weekend spooked markets.

“I don’t see it (a recession) at all,” he said.

“I think this country is going to boom. But, as I said, I can do it the easy way or the hard way. The hard way to do it is exactly what I’m doing, but the results are going to be 20 times greater. And remember Trump is always right.”

Mr Trump bought a Tesla – to be used by White House staff – to show support for the company’s owner and world’s richest man, Mr Musk, after the stock price fell by more than 15 per cent on Monday.

Mr Trump defended his economic agenda, saying that “markets are going to go up and they’re going to go down” but that he was committed to a new effort to ­“rebuild our country”.