Donald Trump has reversed his decision to double US tariffs on Canadian steel and metal imports to 50%, just hours after initially making the threat.
However, tariffs of 25% still proceeded as planned and took effect on Wednesday.
The president’s decision follows the Canadian province of Ontario suspending new 25% charges on electricity exports to certain northern US states.
This move came just hours after Trump had threatened to sharply increase tariffs on Canadian imports.
This development is the latest chapter in an ongoing trade war that poses economic risks for both North American nations.
“Cooler heads prevailed,” Trump trade adviser Peter Navarro told, confirming that the president would not follow through on his most recent tariff threats.
Canada, one of the United States’ closest trade allies, has been a primary target of Trump’s trade disputes since he took office.
Trump has imposed a blanket 25% tariff on goods from both Canada and Mexico.
However, he has also signed orders temporarily exempting several products from these new tariffs, which he claims are meant to address issues related to drug trafficking and illegal migration into the US.
Canadian steel and aluminium are also subject to 25% tariffs, which are scheduled to take effect on Wednesday. Trump announced that he was removing exemptions for certain countries that had previously been shielded from these duties.
In response, Canada has condemned Trump’s tariff measures as unjustified and has announced countermeasures, including tariffs on C$30bn ($22bn; £16bn) worth of US goods.
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Ontario Premier Doug Ford had introduced the electricity charges as leverage to encourage the US to lift its tariffs.
Ford had also previously stated that he would “not hesitate to shut off electricity completely” if the US decided to escalate the situation.
In announcing the suspension of the electricity duties, Ford said he believed it was the “right decision” to focus on broader discussions regarding the North American free trade agreement.
“With any negotiation that we have, there’s a point that both parties are heated and the temperature needs to come down,” he said, acknowledging Commerce Secretary Howard Lutnick for reaching out to arrange 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.”
Early on Tuesday, Trump took to social media to announce his initial threat of doubling tariffs on Canadian steel and aluminium, stating that he was responding to Ford’s actions.
He also criticized Canada for depending on the US for “military protection” and reiterated his desire for the country to become the 51st state of the United States.
Trump added that if Canada were to join the US as a state, it “would make all tariffs, and everything else, totally disappear.”
The White House hailed the episode as a victory, releasing a statement that praised Trump’s approach: “Once again, the president has 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 imposed on imported goods, with the companies importing these goods responsible for paying the tax to the government.
The trade tensions unfolded during an already volatile period for financial markets.
The S&P 500, which tracks the largest US-listed firms, fell another 0.7% on Tuesday after experiencing a 2.7% drop on Monday, marking its steepest single-day decline since December.
The UK’s FTSE 100, which had been slightly down earlier on Tuesday, declined further after Trump’s latest remarks, closing over 1% lower. The French Cac 40 and German Dax indexes followed similar trends.
Monday’s stock market downturn was triggered when Trump, responding to concerns about a potential US recession, described the economy as being in a “transition.”
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Investors remain uneasy about the impact of Trump’s trade policies, fearing that they may drive up inflation in the US and beyond while creating economic uncertainty.
Even before Trump’s latest remarks, American businesses were already expressing concerns about the tariffs.
On Monday, Jason Goldstein, founder of Icarus Brewing, a small New Jersey-based brewery with 50 employees, told the BBC that previous tariff announcements had prompted an influx of emails from suppliers.
These suppliers warned of imminent price hikes on materials such as grain and aluminium cans.
In response, Goldstein has stockpiled an additional month’s supply of cans and postponed new purchases to mitigate the risks associated with market uncertainty and rapidly changing trade policies.
“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.”