Trump’s Tariff U-Turn on Canada Sparks Market Jitters

Donald Trump has shelved a proposal to raise US tariffs on Canadian steel and aluminium from 25% to 50%, reversing course mere hours after issuing the threat. The current 25% duties will still apply, effective 12 March, following a decision by Ontario to scrap its own new 25% charges on electricity exports to northern US states. This came after Trump hinted at sharper trade measures, underscoring the tense economic ties between the two nations. Trade adviser Peter Navarro told a US broadcaster that “cooler heads prevailed,” while Ontario’s Premier Doug Ford called the suspension a strategic move to refocus on broader North American trade talks, crediting US outreach for calming the waters.

Canada, a vital US trading partner, has faced relentless pressure from Trump’s administration. Alongside Mexico, it’s been hit with a 25% tariff on goods since early this year, though some exemptions are now expiring—steel and aluminium duties kick in from Wednesday. Canada retaliated with tariffs on C$30 billion (£16 billion) of US exports, decrying Trump’s moves as baseless. In a fiery social media post, Trump slammed Canada’s reliance on US military support and floated the idea of it becoming the 51st state to wipe out trade barriers—a claim the White House hailed as a triumph of American economic might.

The escalating trade row has rattled financial markets. The US S&P 500 dropped 0.7% on Tuesday, after a 2.7% fall the previous day—its steepest decline since December. The UK’s FTSE 100 closed down over 1%, with France’s Cac 40 and Germany’s Dax following suit, as fears mount over inflation and economic uncertainty tied to Trump’s policies. Investors are on edge, with Monday’s sell-off triggered by Trump’s vague talk of an economic “transition” when pressed on recession risks. The volatility reflects broader concerns about the global fallout from this North American standoff.

US firms are already reeling from the uncertainty. Jason Goldstein of Icarus Brewing in New Jersey, employing 50 people, said suppliers have warned of price hikes on grain and aluminium cans due to earlier tariffs. He’s stockpiled a month’s supply and paused new purchases, calling it a “definitely worrying time.” Goldstein now finds himself glued to news updates to anticipate his industry’s next shift—a stark illustration of how Trump’s trade agenda is unsettling small businesses. As tensions simmer, the real-world impact continues to grow.