Ontario backs down after Trump escalates tariff threats

Ontario said it would suspend new charges on electricity that it sends to some northern states in the US hours, backing down after Trump threatened to sharply increase his tariffs on the country.

Doug Ford, the leader of Canada’s most populous province, said he would halt the 25% surcharge after a “productive” conversation with the US commerce secretary and a promise of a meeting.

White House officials said Trump would also drop his latest threats, which would have targeted the car industry and doubled tariffs on Canadian steel and aluminium imports.

It marked the latest skirmish in a trade war that risks economic damage to the two North American neighbours.

“Cooler heads prevailed,” said Trump trade adviser Peter Navarro told broadcaster CNBC, confirming that Trump would not move forward with his latest tariff threats.

Canada, one of America’s closest trade partners, has borne the brunt of Trump’s ire as he has launched trade battles in his first months in office.

Trump has hit goods from the country, along with Mexico, with a blanket 25% tariff, though he signed orders temporarily exempting a significant number of items from the new duties, which he said were a response to drug and migrants crossing into the US.

Canada is also facing 25% tariffs on its steel and aluminium, which are set to go into effect on Wednesday, after Trump said he was ending exemptions to the duties previously granted to some countries.

Canada has called Trump’s attacks unjustified and announced retaliation, including new tariffs on C$30bn ($22bn; £16bn) US products.

Ford had announced he would tax electricity exports to the US in an effort to get those tariffs removed.

He had also previously said he would “not hesitate to shut off electricity completely” if the US “escalates”.

Announcing the decision to suspend the electricity duties, Ford said he thought it was the “right decision” to try to start focus the discussions on the wider North American free trade deal.

“With any negotiation that we have, there’s a point that both parties are heated and the temperature needs to come down,” he said, thanking Commerce Secretary Howard Lutnick for reaching out about a meeting.

“They understand how serious we are,” he added. “We have both agreed, let cooler heads prevail. We need to sit down and move this forward.”

In his social media post early on Tuesday, which threatened to double levies on Canadian steel and aluminium, Trump said he was responding to Ford’s moves.

He also criticised Canada for relying on the US for “military protection”, and reiterated that he wanted the country to become the 51st US state.

He add that it “would make all tariffs, and everything else, totally disappear” if Canada were to join the US as a state.

The White House declared the episode a win, saying in a statement that Trump had “once again used the leverage of the American economy, which is the best and biggest in the world, to deliver a win for the American people”.

Tariffs are taxes charged on goods imported from other countries.

The companies that bring the foreign goods into the country pay the tax to the government.

The back-and-forth came during a turbulent time for markets.

The S&P 500 index of the largest firms listed in the US fell a further 0.7% on Tuesday after dropping 2.7% on Monday, which was its biggest one-day drop since December.

The UK’s FTSE 100 share index, which had edged lower earlier on Tuesday, fell further following Trump’s latest comments and closed down more than 1%. The French Cac 40 index and German Dax followed a similar pattern.

Monday’s stock market sell-off had begun after Trump said the economy was in a “transition” when asked about whether the US was heading for a recession.

Investors have been concerned about the economic effects of Trump’s trade policies, which it is feared could push up inflation in the US and beyond, while uncertainty leads to economic paralyisis.

Even before Tuesday’s comments, Trump’s tariffs had already been causing concern for US businesses.

On Monday, Jason Goldstein, founder of Icarus Brewing, a small beer-maker in New Jersey that employs 50 people, told the BBC that previous tariff announcements had prompted a slew of emails from his suppliers.

They have been warning that price increases for everything from grain and aluminium cans are likely to be coming.

Mr Goldstein has stockpiled an extra month’s supply of cans and held off on new purchases as a result of the uncertainty and rapidly changing situation.

“It’s definitely a worrying time for us,” he said.

“Never before in my life have I had to read so much news, watch so much news to know, here’s what my industry’s going to look like tomorrow.”