Trump backs down on 50% steel and aluminium tariffs after Ontario drops electricity surcharge

US President Donald Trump backed down on a threat to double planned tariffs on steel and aluminium to 50 per cent for Canada, after Ontario's Premier dropped a threat to add a surcharge to electricity exports.

Doug Ford's decision to drop the surcharge meant the tariffs would not be enacted on Wednesday, top White House trade adviser Pete Navarro told CNBC. Mr Navarro said that Commerce Secretary Howard Lutnick had done "a beautiful job negotiating that".

Mr Ford said earlier that Mr Lutnick had called him and that he had agreed to remove the surcharge.

“He has to bounce it off the President but I’m pretty confident he will pull back,” Mr Ford said of the steel and aluminium tariff threat. "By no means are we just going to roll over. What we are going to do is have a constructive conversation."

Mr Trump made the threats of increased tariffs on his Truth Social platform earlier on Tuesday, saying they would take effect on Wednesday. The US has also levied tariffs on its southern neighbour Mexico and on China.

The comments come amid a massive stock market sell-off this week, as the President faces increasing pressure to show he has a plan to grow the economy and not send it spiralling into a recession. The selling continued on Tuesday, with the Dow down more than 1.5 per cent at midday.

Mr Trump has given a variety of explanations for his antagonism towards Canada, saying his 25 separate tariffs are about fentanyl smuggling and voicing objections to Canada putting high taxes on dairy imports that penalise US farmers. But he continued to call for Canada to become part of the US as a solution, a form of perceived taunting that has infuriated Canadian leaders.

“The only thing that makes sense is for Canada to become our cherished 51st state,” Mr Trump said in his post on Tuesday. “This would make all tariffs, and everything else, totally disappear.”

White House press secretary Karoline Leavitt defended the President's decision on Tuesday by highlighting a chart that showed Canadian tariffs on US dairy products.

"If you look at the rates of tariffs across the board that Canadians have been imposing on the American people and our workers here, it is egregious … not just Canada, but the rate of tariffs across the board," she said. "If you look at Canada … American cheese and butter, a nearly 300 per cent tariff."

Ms Leavitt failed to mention that Canada's tariffs on dairy come into effect only if the US hits a certain quota, which it has not done in years.

As to the President's calls to make Canada the 51st state, she said: "Canada is a neighbour. They are a partner. They have always been an ally. Perhaps they are becoming a competitor now. But as the President also laid out in his Truth Social posts today, he believes that Canadians would benefit greatly from becoming the 51st state of the United States of America."

Mr Ford earlier called Mr Trump’s decision to raise tariffs yet again “disappointing” and repeated that the President was responsible for the escalating trade war.

“This is absolute chaos created by one person and that's Donald Trump, not the American people. I always say Canadians love Americans. I love Americans and this has to stop,” Mr Ford said.

The Conservative leader of Canada’s most populous province said the countries should sit at the table and renegotiate the US-Mexico-Canada agreement, which Mr Trump brokered during his first term.

Brian Jean, Minister of Energy and Minerals of Alberta, said more tariffs on oil would have a profound effect on US citizens. "Let's be clear: if we brought that up to 25 [per cent] there would be serious ramifications to the people of the US and the people of Canada," he said during CeraWeek in Houston, Texas.

Meanwhile, Oxford Economics lowered its GDP growth forecast for the US for 2025 by 0.4 percentage points to 2.0 per cent, and made much steeper adjustments to Canada and Mexico, reflecting the assumption of more aggressive US tariffs, the firm said in a report released on Tuesday.

"We assume that tariffs of up to 25 per cent will be imposed on US imports from Canada and Mexico from April 2, but with some exemptions and reduced rates for certain products, including energy. Our conviction on these tariff assumptions isn't strong and risks have shifted away from more aggressive tariffs toward a more balanced position," said Ben May, director of global macro research, and Ryan Sweet, chief of US economics, noting the spillovers to the rest of the world are likely to be limited.

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