Donald Trump makes a U-turn on tariffs for Canadian steel and aluminium, hours after announcing them

United States President Donald Trump in the morning on March 11 announced the doubling of tariffs on steel and aluminium from Canada to 50 per cent, before taking a U-turn within hours, in rapid-fire moves that hit the financial markets, according to a report by Reuters.

The roll back came as Ontario Premier Doug Ford also reversed his decision to impose 25 per cent surcharge on supply of electricity to the over 1 million homes in the US. Doug had previously said that the surcharge would stay unless Donald Trump dropped all of tariff threats against Canada.

However, Donald Trump's see-saw on tariffs ripped through the financial markets, which have already been battered by the threat of a trade war and unsteady economic conditions in the US due to the US president's policies on government spending, job cuts and geopolitics.

How Did the Stock Markets React?

Donald Trump triggered a sell-off in the morning with a post on Truth Social saying that he had told US Commerce Secretary Howard Lutnick to raise tariffs on Canadian aluminium and steel by 25 per cent — taking the effective tariff to 50 per cent. Then later came the U-turn.

Notably, the 25 per cent tariff imposed on all steel and aluminium products imported into the US is set to take effect from March 12.

The back and forth hit the S&P 500 index hard and it slumped to 5,528.41 points, briefly marking a 10 per cent fall from its record closing high of 6,144.15 on February 19, as per the report. Overall, the US stock markets have erased close to $5 trillion of market value since Donald Trump won the election in November and they reached record levels in February, the report said.

What Did Donald Trump Say?

Speaking to reporters however, Donald Trump was unfazed my the fall, saying that his focus was on the economy and that markets would go up and down. He added that tariffs could rise to pressure companies into moving their manufacturing into the US.

“The higher it goes, the more likely it is they're going to build ... The biggest win is not the tariffs. That's a big win. It's a lot of money. But the biggest win is they move into our country and produce jobs,” he said, insisting the tariffs would “be throwing off a lot of money to this country”, the report added.

What Did the White House Announce?

In an official announcement the White House said that only the previously planned 25 per cent tariffs on steel and aluminum products from Canada would be imposed. It termed the flip-flop as “leverage”.

“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. Pursuant to his previous executive orders, a 25% 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 12th,” White House spokesperson Kush Desai said in a statement.

What is expected in the future?

Investors are bracing for a further round of tariffs on autos as well as tit-for-tat reciprocal tariffs in early April, the report noted. In the “trade war” Canada and China have already retaliated against US tariffs by imposing their own, while Mexico delayed similar plans after Donald Trump rolled back immediate action on the southern US neighbour, the report said.

Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center told Reuters that “this is what a trade war looks like”, adding that the “tit-for-tat escalation” could “quickly spiral to both sides' economic detriment”.

Donald Trump's hyper-focus on tariffs in his second term as President has shaken investor, consumer and business confidence, the report said, adding that economist worry a recession is on its way. A small business survey on March 11 showed sentiment weakening for a third straight month; a survey of households by the New York Federal Reserve on March 10 showed consumers are more pessimistic about their finances, inflation and the job market.

(With inputs from Reuters)