Starting from March 12, the U.S. implemented a 25% tariff on steel and aluminum imports from all its trading partners.
Just the day before, President Donald Trump reversed his decision to impose an additional 25% tariff on Canadian steel and aluminum. This change came after Trump had threatened to use his executive powers to levy tariffs as high as 50% on Canadian imports. In response to this, the Premier of Ontario, following talks with the U.S. Secretary of Commerce, announced that Ontario would remove the 25% surcharge on electricity exported to three U.S. states. Meanwhile, on the same day, the Canadian government retaliated, imposing a 25% counter-tariff on U.S. goods totaling 29.8 billion Canadian dollars.
The ongoing trade dispute between the U.S. and Canada highlights broader trends in U.S. economic policy. Recent unilateral actions by the U.S. have raised global concerns that U.S. economic growth is increasingly uncertain, with risks such as high inflation, overvalued assets, and mounting debt becoming more pronounced due to the current economic governance model.
The Trump administration’s approach to tariffs has been marked by unpredictability. For example, on February 1, Trump signed an executive order imposing 25% tariffs on Canadian and Mexican imports. In response, both Canada and Mexico pressed Trump to cancel the tariffs in exchange for stronger border controls. After a brief 30-day pause announced on February 3, the tariffs were put into effect by March 4. In retaliation, Canada imposed 25% tariffs on $30 billion worth of U.S. products, including poultry, meat, dairy, wheat, and other food items.
Trump had also threatened to raise the tariff on Canadian steel and aluminum imports to 50%, a move that particularly affected Canada, the largest steel and aluminum exporter to the U.S. In retaliation, Canada imposed equivalent tariffs on U.S. imports, and Ontario levied a 25% surcharge on electricity exports to the U.S. This move impacted 1.5 million residents in U.S. states like Michigan, Minnesota, and New York, which share a border with Canada.
Trump’s decision to backtrack on his tariffs against Canada came in the face of strong resistance. While Trump believes that high tariffs will protect U.S. manufacturing and bring investments back to the country, this policy has proven to be damaging to international relations. Almost every U.S. trading partner, including Canada and the European Union, has launched countermeasures, which will inevitably affect U.S. exports and potentially harm the U.S. economy.
The most immediate consequence of the high tariffs is the rising cost of imported goods, leading to inflation. This, in turn, could suppress consumer spending and investment, eventually stalling U.S. economic growth. Concerns about a potential U.S. recession are growing, with former U.S. Treasury Secretary Lawrence Summers warning that the probability of a recession has reached 50%.
Recent fluctuations in the U.S. stock market reflect increasing investor anxiety. The once-celebrated Trump deal mentality has shifted toward a pervasive sense of Trump recession panic. On March 10, the U.S. stock market experienced a Black Monday, with the major stock indexes in New York falling dramatically. This forced Trump to acknowledge that the stock market was undergoing a necessary correction, contradicting his previous claims that the market’s boom was a result of his policies.
If Trump remains adamant about his tariff policies, the negative impact on the U.S. economy may only be starting.
The erratic nature of these tariff policies underscores the deep contradictions within the Trump administration’s economic strategy. While Canada’s retaliation has shown Trump the damage that such measures can cause, he and his advisers seem unwilling to recognize the fundamental nature of international trade, which is based on mutual benefit.
Simply waging a tariff war will not benefit the U.S. in the long run. Instead, negotiating mutually beneficial compromises with trading partners is essential. If the U.S. wants to reduce its trade deficit, it may need to curb the overreliance on debt and reduce government spending—particularly on defense. However, such steps would likely upset powerful interest groups. Consequently, Trump’s economic policies remain in contradiction, and his foreign policy is likely to remain unpredictable.
Source: angusreid, NewsChannel 9 WSYR Syracuse, China US Focus
