2025. 3.12
Trade tensions between the United States and Canada have escalated dramatically as U.S. President Donald Trump announced a 50% tariff increase on Canadian steel and aluminum. This measure was a response to Canada’s retaliatory electricity export tax, showcasing a new phase in the tariff war between the two countries. The announcement of the tariff increase and subsequent developments have significant implications for international trade relations and the economy.
Background and Announcement of the Tariff Increase
On March 11, 2025, President Trump announced via his social media platform Truth Social that he would increase tariffs on Canadian steel and aluminum from the existing 25% to 50%. Specifically, he instructed Commerce Secretary Wilbur Ross to impose an additional 25% tariff, which was scheduled to take effect on the morning of March 12. This represents a doubling of the 25% tariff rate that Trump had previously announced.
This sharp tariff increase was a direct retaliatory measure against the decision by Canada’s Ontario province to impose a 25% surcharge on electricity exported to the United States. President Trump explained, “Based on Ontario imposing a 25% tariff on electricity entering the United States, I have directed the Secretary of Commerce to add a 25% tariff on all steel and aluminum coming from Canada, bringing it to 50%.”
Given that Canada’s electricity export tax was a response to the Trump administration’s initial announcement to impose a 25% tariff on Canadian imports, this can be seen as a chain of retaliatory measures between the two countries.
Additional Threats and Pressure
President Trump announced additional pressure measures beyond the steel and aluminum tariff increase. First, he stated that he would soon declare an “electricity national emergency” in states such as New York, Michigan, and Minnesota, which Canada had warned about electricity export taxes. Through this, he explained that “the United States will be able to quickly take necessary measures to mitigate Canada’s unfair threats.”
Furthermore, Trump demanded that “Canada must immediately reduce its ‘anti-American farmer tariffs’ of 250%-390% on various American dairy products, which have long been considered outrageous.” He then threatened to significantly increase tariffs on Canadian automobiles from April 2 if Canada did not abolish these tariffs. Trump warned that such measures “would result in the permanent closure of the Canadian automobile manufacturing industry.”
Rapid Change and Easing of the Situation
Interestingly, immediately after the tariff increase announcement, the situation changed rapidly. Doug Ford, the Premier of Ontario, Canada, announced that he would temporarily suspend his electricity export tax measure. Ford stated that after a “productive conversation” with the U.S. Secretary of Commerce, he would temporarily suspend the 25% additional fee burden on electricity exported to the United States.
In response, President Trump also adjusted his position. When asked at a White House meeting with reporters whether he could cancel the plan to impose 50% tariffs on steel and aluminum since Canada had eased its tariff response, he replied, “We’re looking at it, and probably will.” This demonstrates that Trump is strategically using tariffs as a means to pressure other countries.
Economic Ripple Effects
Trump’s tariff policies and the conflict between the two countries are already causing significant market shocks. Due to the uncertainty caused by the tariff imposition announcement, U.S. stock markets fluctuated greatly, with the NASDAQ index plunging 4% on the 10th. This was the largest drop recorded in 2 years and 6 months since September 13, 2022.
In the aluminum market, in particular, an immediate price increase was observed. The aluminum premium including tariffs in the U.S. Midwest market soared to about $990 per ton (approximately 1.44 million won) on March 11, nearly 20% higher than the previous day and more than 70% higher compared to the beginning of the year.
Additionally, due to the effects of President Trump’s tariff war, gold holdings at the Commodity Exchange (COMEX) in New York reached record high levels. As of March 5, COMEX’s gold inventory was 39.7 million ounces, recording the highest level since the start of statistics in 1992, amounting to approximately $115 billion. The increase in gold inventory was due to the prospect that gold could be included in tariff measures, along with the rise in U.S. gold prices compared to the global benchmark.
Trump’s Tariff Policy in a Broader Context
This tariff increase on Canada is part of President Trump’s broader tariff policy. Trump had already announced in February that he would impose a 25% tariff on all steel and aluminum imported into the United States. Tariffs are central to Trump’s economic vision, as he expects them to grow the U.S. economy, protect jobs, and increase tax revenue.
However, economists are increasingly expressing concerns that such tariff policies could lead to a recession. According to a small business survey, confidence has weakened completely after Trump’s election victory on November 5, 2024, with sentiment weakening for three consecutive months.
Conclusion
President Trump’s announcement of a 50% tariff increase on Canadian steel and aluminum has heightened tensions in U.S.-Canada trade relations, but the crisis appears to be calming down due to the rapid response and negotiations between the two countries. However, this case clearly demonstrates the Trump administration’s strategy of pressure through tariffs, the responses of trade partner countries, and the possibility of rapid expansion and mitigation of international trade tensions.
Such tariff wars lead to market instability in the short term, but in the long term, they can influence the reorganization of the world trade order and economic relations between countries. It is necessary to pay attention to how the direction of the Trump administration’s tariff policy and the responses of trade partner countries will affect the international economy in the future.