Donald Trump, Ontario in tariff fight

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United States President Donald Trump escalated his trade war with Canada on Tuesday by announcing an additional 25 per cent tariff on the country’s steel and aluminum to raise the total levy to 50 per cent, which is often cited as an untenable threshold for domestic industrial producers.

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Trump said he would raise the levies in response to the 25 per cent surcharge that Ontario added on Monday to its electricity exports to U.S. states, including Michigan. He said he could also “substantially increase” his levy on Canadian vehicles on April 2, threatening to “permanently shut down” auto-making in Canada if its tariffs on dairy and other products are not eliminated.

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Ontario Premier Doug Ford has been outspoken about his stance that the province and Canada must fight back until Trump removes all tariffs and stops threatening to impose them.

“One person is responsible, and that’s President Trump,” Ford said on CNBC on Tuesday, shortly after Trump’s announcement.

He said he is scheduled to speak with U.S. Commerce Secretary Howard Lutnick later in the day, and expressed a desire to negotiate an end to the trade war and apologized to Americans about applying the electricity surcharge.

“We need to sit down at the table and get our differences out and move on, not go tit-for-tat,” he said.

Still, Ford refused to back down and said he would not hesitate to cut off energy exports to the U.S.

The trade war has jolted investors. The Nasdaq composite on Monday fell four per cent — its worst day since 2022 — while the S&P dropped about 2.7 per cent and the Dow Jones Industrial Average fell two per cent.

Technology companies, including Apple Inc., Amazon.com Inc. and others all fell, as did Tesla Inc., which plummeted 15 per cent — its worst day since 2020.

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Meanwhile, the S&P/TSX composite index was essentially flat.

Trump had threatened to hit Canada’s steel and aluminum sectors with 25 per cent and 10 per cent tariffs, respectively, effective on March 4, but he quickly waived those tariffs for products that comply with the terms of the Canada-United-States-Mexico Agreement (CUSMA).

But that was only part of his tariff threats. Trump has also said he will apply 25 per cent tariffs to steel and aluminum from all countries on March 12. Now that tariff will jump to 50 per cent for Canadian steel and aluminum, which Canadian representatives from both sectors said would make products non-competitive and essentially cut off their largest market.

Mike Garcia, chief executive of Sault Ste. Marie, Ont.-based Algoma Steel Inc., which operates three steel plants in Canada, last week said 50 per cent tariffs would be a “very serious” threat to the company.

Ford has said the electricity surcharge is creating around $300,000 per day in added revenue, which he promised to use to help cushion the blow of the U.S. tariffs.

Larry Summers, a former U.S. treasury secretary under Bill Clinton and a prominent economist, has called Trump’s tariffs a “self-inflicted” wound at a time when the country’s economy is teetering on the brink of recession — a something the president acknowledged as a possibility this week.

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“The just-announced tariffs on Canadian steel and aluminum are the worst trade policy yet,” Summers said on X, formerly known as Twitter. “Increasing the price of key inputs for the U.S. manufacturing industries — who employ 10 million people — is what a U.S. adversary would do.“

Tony Stillo, director of Canada economics at Oxford Economics, said the new 50 per cent tariffs on Canadian steel and aluminum are likely to have a disproportionately negative effect compared to Ontario’s 25 per cent electricity surcharge.

He also cited U.S. Census Bureau data that suggests 62 per cent of Canada’s exports to the U.S. are not CUSMA-compliant, meaning they would still be subject to 25 per cent tariffs.

Stillo said many companies opted to not complete the paperwork to show CUSMA compliance because non-compliance triggered a relatively low penalty, usually around 2.5 per cent.

But with the tariff raising the cost of non-compliance to 25 per cent — paid by the importer of record, which could be either the producer or the consumer, depending on the situation — he said more companies are rushing to show compliance.

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“There’s a lot of irony at play,” Stillo said. “He’s going to add regulatory burden on his own firms.”

He said the most significant impact on Canada from the U.S. tariffs has been to create uncertainty about the economic outlook, which is freezing investment.

Stillo described the trade spat between Trump and Ford as “mutually assured destruction” and hoped one or the other would de-escalate.

“Hopefully, someone will call the other’s bluff,” he said. “Nobody wins a trade war; that’s how this works. Nobody wins.”

• Email: gfriedman@postmedia.com

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