Trump stops plan for 50% tariffs on Canadian steel and aluminium, preventing a significant escalation in trade tensions between the two countries. The decision comes after economic and political pressure from both U.S. industries and Canadian officials, who warned of potential retaliation. By halting the tariff hike, the U.S. aims to maintain stability in the steel and aluminium markets while continuing trade discussions with Canada.
Table of Contents
Why is Trump putting tariffs on Canada?
President Donald Trump’s recent decision to impose tariffs on Canadian imports stems from multiple concerns:
- Ontario’s Electricity Surcharge: Ontario imposed a 25% surcharge on electricity exports to U.S. states such as Minnesota, New York and Michigan. In response, Trump announced plans to double tariffs on Canadian steel and aluminum from 25% to 50%. However, after Ontario agreed to suspend the surcharge, the U.S. maintained the original 25% tariff rate.
- Illegal Immigration and Drug Trafficking: Citing national security concerns, particularly regarding illegal immigration and the trafficking of drugs like fentanyl Trump invoked the International Emergency Economic Powers Act to justify the tariffs. He claimed that Canada had played a “central role” in allowing fentanyl to enter the U.S. despite evidence suggesting the majority comes through the southern border with Mexico.
- Economic Protectionism: The tariffs aim to incentivize domestic manufacturing by making imported goods more expensive, encouraging companies to produce within the United States.
These measures have escalated trade tensions, with Canada considering retaliatory tariffs and both economies facing potential disruptions.
Impact on US-Canada Trade
The commercial relationship between the United States and Canada has been severely damaged by the recent increase in tariffs between the two countries. President Donald Trump reinstated a 25% global tariff on steel and aluminum imports on March 12, 2025, and extended charges to several downstream products. Major suppliers including Canada, Brazil, Mexico and South Korea were most impacted by this action, which exacerbated the existing trade war. To offset the U.S. tariffs, Canada is thinking of non-tariff measures including restricting oil exports and levying taxes on minerals.
The tariffs are anticipated to raise prices for American industries that depend on steel and aluminum, including construction companies and automobile which could result in increased consumer prices and job losses in these areas. Although the tariffs are intended to safeguard domestic producers, detractors contend that they could unintentionally hurt the overall economy by rekindling inflation and reducing economic growth.
Canadian tariffs on U.S. goods before Trump
Under accords like the North American Free commercial Agreement (NAFTA), Canada and the United States had a comparatively open commercial relationship before President Trump’s presidency, marked by low tariffs. However, Canada has responded to U.S. trade moves by imposing duties on certain U.S. goods during trade negotiations and disputes. For example, in 2018, in reaction to U.S. tariffs on Canadian steel and aluminum Canada imposed retaliatory taxes on U.S. imports, such as steel, aluminum and other consumer items. The purpose of these actions was to put pressure on the US to reevaluate its trade policies that impact Canadian exports.
It’s crucial to remember that the two nations’ trade dynamics have changed over time due to a variety of political and economic circumstances. The historically cordial trading relationship between the United States and Canada is no longer reflected in the current trade disputes.
Canada Response
Citing national security concerns, President Donald Trump levied a 25% tariff on imports of steel and aluminum at the beginning of 2025. Canada was one of the primary suppliers impacted by this action. Canada imposed a 25% tariff on $16.6 billion worth of U.S. exports in retaliation.
Ontario’s Electricity Surcharge and Subsequent Negotiations
Premier Doug Ford of Ontario imposed a 25% tax on electricity exports to the United States. President Trump responded by threatening to quadruple tariffs on metals from Canada. But following discussions, Ontario decided to suspend the surcharge, which prompted President Trump to halt the proposed tariff rise and keep it at the current 25% rate.
Trade Relations and Political Transition
Mark Carney is expected to become the next prime minister of Canada after winning the leadership of the Liberal Party amid ongoing trade concerns. Carney has emphasized a hard position against U.S. economic pressures and pledged to maintain Canada’s retaliatory tariffs until the U.S. agrees to free trade agreements.
Economic Consequences
Major stock indices have seen sharp drops as a result of market volatility brought on by the rising tariffs. Investors worry that erratic trade policies could have a detrimental effect on the stability of the world economy.
In conclusion, Canada has reacted to U.S. tariffs through diplomatic discussions, reciprocal actions and a pledge to protect its economic interests in the face of shifting political conditions.
Canadian tariffs on U.S. goods prior to 2025
Before 2025, the United States and Canada had a strong trading relationship, which was made possible in great part by accords such as the United States-Mexico-Canada Agreement (USMCA) and the North American Free Trade Agreement (NAFTA). Tariffs on the majority of goods exchanged between the two nations were drastically lowered or removed as a result of these accords. However, Canada imposed tariffs on specific U.S. imports as a result of specific disputes:
Softwood Lumber Dispute:
The United States has long imposed tariffs on Canadian softwood lumber after alleging that Canadian timber was illegally subsidized. In response, Canada took action contesting these allegations and attempting to settle them through many agreements and arbitration proceedings.
2018 Retaliatory Tariffs:
In 2018, Canada levied retaliatory tariffs on U.S. imports totaling around $16.6 billion in response to U.S. duties on Canadian steel and aluminum. The purpose of these tariffs was to put pressure on the United States to reevaluate its trade policy by targeting a variety of products, such as consumer goods, steel and aluminum.
Cultural and agricultural disputes:
Canada has attempted to defend its cultural sectors against American domination in the cultural industries, as well as in relation to agricultural products like wheat and beef.
These disagreements draw attention to times when Canada imposed taxes on American goods in retaliation for certain U.S. trade acts, even if overall the trade relationship has been largely cooperative.
Conclusion
In conclusion, Canada’s tariffs on U.S. goods before 2025 were primarily retaliatory measures in response to American trade policies. While agreements like NAFTA and USMCA facilitated free trade, disputes over softwood lumber, steel, aluminum, and agricultural products led Canada to impose targeted tariffs. These measures were designed to counteract U.S. tariffs and protect Canadian industries. Despite occasional trade tensions, both countries have historically sought diplomatic solutions balancing economic cooperation with national interests.
FAQs
Why did Trump stop the plan for 50% tariffs on Canadian steel and aluminium?
Trump stopped the plan for 50% tariffs on Canadian steel and aluminium due to concerns over economic impact and pressure from both U.S. industries and Canadian officials.