US President Donald Trump escalated trade tensions with Canada on Tuesday by doubling tariffs on steel and aluminum imports from 25% to 50%, citing price hikes on electricity by Ontario’s provincial government as the reason for the move.
“I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA,” Trump posted on Truth Social, calling Canada “one of the highest tariffing nations anywhere in the world.”
The US stock market immediately dropped following the announcement, further fuelling concerns about an economic slowdown, news agency AP reported.
After two weeks of sharp market declines fuelled by Trump’s tariff threats, the president is facing mounting pressure to reassure investors that his trade policies will boost economic growth rather than trigger a recession.
Trump was scheduled to speak to the Business Roundtable, a trade group representing top corporate executives, later in the afternoon. While he previously promised lower corporate taxes to encourage domestic manufacturing, his expanding tariff policies—targeting Canada, Mexico, China, and possibly Europe, Brazil, South Korea, and several industries including pharmaceuticals, lumber, and computer chips—could act as a significant tax hike on businesses.
The stock market’s reaction suggests a vote of no confidence in Trump’s economic approach, placing him in a difficult position between his protectionist trade policies and his image as a pro-business leader.
Economists warn of recession risks
Economists are growing increasingly concerned about the impact of Trump’s tariffs on inflation and economic growth. Former Treasury Secretary Larry Summers, now a Harvard economist, estimated the chances of a US recession at 50-50.
“All the emphasis on tariffs and all the ambiguity and uncertainty has both chilled demand and caused prices to rise,” Summers posted on X (formerly Twitter). “We are getting the worst of both worlds—concerns about inflation, an economic downturn, and more uncertainty about the future. That slows everything.”
Meanwhile, Goldman Sachs cut its US growth forecast for 2025 from 2.2% to 1.7% and slightly raised the probability of a recession to 20%, noting that the White House could still reverse course if economic conditions worsen, according to news agency AP report.
Trump has defended his aggressive trade policies, arguing they will encourage companies to relocate factories to the US to avoid tariffs. However, during a Fox News interview on Sunday, he did not rule out a potential recession.
“There is a period of transition because what we’re doing is very big,” Trump said. “We’re bringing wealth back to America. It takes time, but I think it will be great for us.”
Despite his assurances, investors remain uneasy, with the S&P 500 plunging 2.7% on Monday, wiping out all market gains since his 2024 election victory. The index continued to decline in early Tuesday trading.
White House points to job creation
Despite the market turbulence, the White House attempted to highlight the positive effects of tariffs late Monday, stating that companies like Honda, Volkswagen, and Volvo were considering new US factory investments.
The administration claimed that Trump’s policies—including tariffs, deregulation, and increased energy production—had led industry leaders to commit to creating thousands of new jobs.
However, the broader impact remains uncertain. The US economy added 2.2 million jobs in 2024 alone, making the effect of new job creation from tariffs relatively small in comparison.