After another chaotic day in Canada-U.S. relations, U.S. President Donald Trump dropped his threat to double tariffs on Canadian steel and aluminum imports after Ontario agreed to pause a surcharge on electricity exports.
White House spokesman Kush Desai confirmed a 25 per cent tariff on steel and aluminum, with no exceptions, will go into effect for Canada and all other countries on Wednesday.
Markets went into a tailspin when Trump threatened on social media Tuesday to increase the duties on Canadian steel and aluminum to 50 per cent in response to Ontario's decision to place a 25 per cent surcharge on electricity exports to three U.S. states.
"They will pay a financial price for this so big that it will be read about in History Books for many years to come!" Trump posted on social media earlier Tuesday.
The president also called on Canada to immediately drop duties on dairy and other "long time tariffs" and threatened to "essentially, permanently shut down the automobile manufacturing business in Canada" with tariffs in April.
U.S. Commerce Secretary Howard Lutnick and Ontario Premier Doug Ford subsequently spoke on the phone. A joint statement said Ford, Lutnick and new United States Trade Representative Jamieson Greer would meet in Washington on Thursday "to discuss a renewed (Canada-U.S.-Mexico-Agreement) ahead of the April 2 reciprocal tariff deadline."
"We need to sit down, get this done," Ford told NBC News.
Trump said he appreciated Ford's call and described the premier as both a "strong man" and a "gentleman." But Trump also repeated his claims about trade deficits and said Canada should become a U.S. state.
"Frankly, the way that gets solved is Canada should honestly become our 51st state," Trump said outside the White House as he looked at Tesla cars with Elon Musk.
"We wouldn't have a northern border problem, we wouldn't have a tariff problem."
Markets have been in turmoil since Trump launched — and partly paused — a trade war with Canada and Mexico last week.
Ottawa responded with an initial batch of retaliatory tariffs, but paused the second wave last Thursday after Trump signed an executive order delaying until April tariffs on goods that meet the rules-of-origin requirements under the Canada-United States-Mexico Agreement on trade, also called CUSMA.
The White House has said Wednesday's steel and aluminum tariffs will stack on top of any other duties that Trump introduces in April.
About a quarter of all steel used in the United States is imported and Canada is the largest supplier, accounting for nearly 25 per cent of all U.S. steel imports in 2023. Canada is also the United States' largest source of aluminum.
Prime minister-designate Mark Carney said in a post on social media that he will keep Canada's retaliatory tariffs in place until "Americans show us respect" and commit to free trade again.
Carney is expected to be sworn in as prime minister before the end of the week. The White House said Carney had not yet spoken with the president.
Trump has directed a range of complaints and tariff threats at Canada since his election win last November. Canadian officials have said Trump's ultimate goal is to weaken the Canadian economy in order to annex the country.
When asked whether the Trump administration still sees Canada as an ally, White House Press Secretary Karoline Leavitt said "Canada is a neighbour, they are a partner, they have always been an ally — perhaps they are becoming a competitor now."
The president's initial tariff threats were linked to the flow of deadly fentanyl across the border — but U.S. government data shows the volume of drugs crossing the northern border is minuscule compared with the amounts crossing the border with Mexico.
Trump also has complained about Canadian defence spending and trade, and has often misrepresented Canada's dairy market policy.
Canada uses "tariff rate quotas" which place a limit on the quantity of a product that can be imported at a lower tariff rate. Under CUSMA, most importers don't pay those high tariffs on Canadian dairy. Around 99 per cent of products traded between the two nations were tariff-free.
Trump's actions don't make sense but they're not "really that different" from his behaviour during his first administration, said Republican strategist Doug Heye.
"We know that Trump doesn't really do nuance," Heye said. "His messaging is blunt force trauma."
During the first Trump administration, when CUSMA was being negotiated to replace the North American Free Trade Agreement, the president used his national security powers to impose a 25 per cent tariff on steel imports and a 10 per cent tariff on aluminum imports in March 2018.
Canada and other countries introduced their own duties on the U.S. in response.
Nearly a year later, the White House announced a deal had been reached with Canada and Mexico, ending the trade dispute.
Economists have said Trump's initial tariffs on steel and aluminum were costly. A report by the Washington-based Tax Foundation said companies were forced to pay higher prices, U.S. exports dropped and the duties resulted in the loss of about 75,000 manufacturing jobs.
The Peterson Institute for International Economics found that each job saved in steel-producing industries came at a high cost to consumers — roughly $650,000 per job.
