United States President Donald Trump announced this Tuesday a significant increase in tariffs on steel and aluminum imports from Canada, doubling the rate to 50%. This measure will take effect within hours and has raised concerns in financial markets, as well as among business leaders who warn of a negative impact on consumption.
Why did Trump double tariffs on Canada?
The trade conflict escalated after Doug Ford, Premier of Ontario, announced a 25% tariff on electricity that the Canadian province supplies to 1.5 million households in the United States. Ford justified this measure as a response to Trump’s tariff threats. However, the U.S. president retaliated with a more aggressive decision.
In a post on Truth Social, Trump stated via his social network Truth: “Since Ontario, Canada, has imposed a 25% tariff on the ‘electricity’ entering the United States, I have instructed my Secretary of Commerce to add an ADDITIONAL 25% tariff.”
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What consequences will the national energy emergency declaration have?
Trump also announced his intention to declare a national emergency for electricity in the regions affected by Ontario’s surcharge. This would allow federal resources to be mobilized to mitigate the impact in the states of New York, Michigan, and Minnesota, which rely on Canadian electricity.
Ford, for his part, responded firmly: “We will not back down. We will be relentless. I apologize to the American people for Trump’s decision to launch an unprovoked attack on our country.”
Meanwhile, Mark Carney, Canada’s designated Prime Minister, stated via X: “President Trump’s latest tariffs are an attack on Canadian workers, families, and businesses. My government will ensure that our response has the maximum impact on the U.S. and the minimum impact here in Canada while supporting affected workers.
“My government will maintain our tariffs until Americans show us respect and make credible and reliable commitments to free and fair trade.”
How do these tariffs affect the U.S. economy?
Markets reacted immediately to Trump’s announcement. The S&P 500 index fell more than 1%, while the S&P/TSX Composite on the Toronto Stock Exchange lost 0.6%. The Canadian currency also weakened against the U.S. dollar.
The business sector has warned about the possible effects of these measures on employment and inflation. Canada is the main supplier of iron, steel, and aluminum to the United States, accounting for 41% of imported aluminum and a quarter of imported steel. In 2023, the U.S. imported $11.4 billion worth of Canadian aluminum and $7.6 billion worth of iron and steel.
The imposition of tariffs could lead to increased costs for American consumers and the loss of up to 100,000 jobs, according to William Oplinger, CEO of Alcoa, one of the leading aluminum producers in the U.S.
What impact will it have on the automotive industry?
Trump also threatened to “substantially” increase tariffs on cars manufactured in Canada starting April 2. According to the president, this measure could “permanently shut down the car manufacturing business in Canada,” shifting production to the U.S.
The automotive industry is crucial to Canada’s economy, with major assembly plants operated by manufacturers such as General Motors, Ford, and Stellantis. A tariff increase could make vehicles more expensive in the U.S. and severely impact the economies of Ontario and Quebec, where Canada’s automotive industry is concentrated.
