Trump doubles metals tariffs on Canada, then backs off

US President Donald Trump reversed course on Tuesday afternoon on a pledge to double tariffs on steel and aluminum from Canada to 50 per cent, just hours after announcing the higher tariffs, in rapid-fire moves that scrambled financial markets.

The switch came after a Canadian official also backed off his own plans for a 25 per cent surcharge on electricity.

Trump's latest salvo, which whipsawed financial markets and rekindled fears of inflation, followed Ontario Premier Doug Ford's announcement that he would place a 25 per cent surcharge on the electricity Canada's most populous province supplies to more than a million US homes unless Trump dropped all of his tariff threats against Canada's exports into the US.

Faced with Trump's 50 per cent tariff threat, Ford agreed to suspend the surcharge and meet with US Commerce Secretary Howard Lutnick in Washington on Thursday.

The White House then announced that only the previously planned 25 per cent tariffs on steel and aluminum products from the United States' northern neighbour and all other countries would take effect on Wednesday - with no exceptions or exemptions.

"President Trump has 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," White House spokesperson Kush Desai said in a statement. "Pursuant to his previous executive orders, a 25 per cent tariff on steel and aluminum with no exceptions or exemptions will go into effect for Canada and all of our other trading partners at midnight, March 12.”

The back-and-forth between the US and Canada further unsettled financial markets already battered by Trump's focus on tariffs. After tumbling hard after Trump's initial post on Truth Social, stocks rebounded after Ford said he would suspend the surcharge and Ukraine agreed to a 30-day ceasefire.

The S&P 500 index dropped as low as 5,528.41 points, briefly marking a 10 per cent fall from its record closing high of 6,144.15 on February 19, which is commonly known as a market correction. U.S. stocks have fallen hard since reaching a record high about a month after Trump took office on January 20, with nearly $5 trillion (AED 18.6 trillion) of market value erased from US indexes.

Trump triggered the selloff with a morning post on his Truth Social media platform, saying he had instructed Lutnick to put an additional 25 per cent tariff on the metals products from Canada that take effect on Wednesday, on top of the 25 per cent on all imported steel and aluminum products from other countries.

He also criticised Canada for trade protections on dairy and other agricultural products and threatened to "substantially increase" duties on cars coming into the US that are set to take effect on April 2 "if other egregious, long time Tariffs are not likewise dropped by Canada."

The U.S. president shook off the market gyrations, telling reporters that markets would go up and down, but that he had to rebuild the economy.

Trump, heartened by Ontario's move, said the tariff rates could rise further, building pressure on countries to move manufacturing into the United States.