Canada backs down from 25% electricity surcharge after Trump threats

Ontario Premier Doug Ford said Tuesday he had agreed to suspend a 25% surcharge on electricity imports into the United States after having conversed with U.S. Commerce Secretary Howard Lutnick in the wake of President Donald Trump’s threats to hike steel and aluminum tariffs on the Canada to 50%.

In a statement issued with Lutnick and posted on X, Ford said he and Lutnick would meet Thursday alongside the U.S. trade representative to discuss renewing the U.S.-Mexico-Canada free trade act before Trump’s self-imposed April 2 “reciprocal tariff deadline.”

“In response, Ontario agreed to suspend its 25 per cent surcharge on exports of electricity to Michigan, New York and Minnesota,” Ford said.

In subsequent remarks at the White House, Trump said Tuesday afternoon he was now looking at reducing tariffs on Canada. Asked whether he would lower them, he said, “Probably so.”

“I’ll let you know” whether 50% tariffs on Canada are going into effect, he said.

Major stock indexes, which had plunged on Trump’s earlier tariffs threat, rallied into the green upon the suspension announcement.

Trump had posted on Truth Social Tuesday that steel and aluminum tariffs would go from 25% to 50% starting Wednesday in response to Ontario’s placing a 25% tariff on electricity exported to the United States.

Trump added that he would declare a “national emergency” for the three states Ontario has targeted so the tariffs could go into effect.

Trump also called on Canada to drop its duties on U.S. dairy products and threatened to “substantially increase” tariffs on cars imported into the United States if Canada did not drop “other egregious, long time tariffs.”

The auto tariffs, Trump warned, without citing evidence, “essentially, permanently shut down the automobile manufacturing business in Canada.”

Trump then doubled down on some of his recent rhetoric about making Canada part of the United States, though he added it would get to keep its national anthem.

“The only thing that makes sense is for Canada to become our cherished Fifty First State,” Trump wrote. “This would make all Tariffs, and everything else, totally disappear.”

Canada has quickly emerged as a target of Trump’s ire in his second presidential term, putting the United States’ closest ally on rockier footing. Earlier this month, Trump instituted, then pulled back, tariffs on a variety of Canadian goods as he goaded its leaders and blamed them for a lack of action on fentanyl trafficking. (Relatively little of the drug is seized at the northern border compared with the U.S. border with Mexico).

In another Truth Social post late Monday, Trump called Canada a longtime “tariff abuser.”  

“The United States is not going to be subsidizing Canada any longer,” he warned, adding: “We don’t need your Cars, we don’t need your Lumber, we don’t your Energy, and very soon, you will find that out.”

While Mexico has faced similar tariff threats and rhetoric, its president, Claudia Sheinbaum, has succeeded in assuaging Trump.

The strategy has not worked for Canadian officials, who have more aggressively retaliated with tariffs and public comments.

“I’m not too sure why he continues to attack his closest friends and allies, but we need the American people to speak up,” Ford said Tuesday in an appearance on CNBC. “We need those CEOs to actually get a backbone and stand in front of them and tell them this is going to be a disaster. It’s mass chaos right now.”

CNBC had reported that Trump had not yet signed formal paperwork to officially increase the tariffs to 50%, citing a senior administration official who added it was “in the works” and remained “a threat” rather than an action, until the paperwork was prepared and signed.

Newly appointed Canadian Prime Minister Mark Carney subsequently called Trump’s threats “an attack on Canadian workers, families and businesses.”

“My government will ensure our response has maximum impact in the U.S. and minimal impact here in Canada, while supporting the workers impacted,” Carney said.

He said Canadian tariffs on U.S. goods would remain “until the Americans show us respect and make credible, reliable commitments to free and fair trade.”

Morgan Stanley analysts warned that because the United States is a net importer of steel and aluminum from Canada, the tariffs would lead to higher domestic prices. As an example, although steelmaker Alcoa’s stateside facilities would benefit from higher tariffs, it has an even larger presence north of the border.

“We expect a net negative impact to the company as a whole,” the analysts wrote.

Some investors disagreed, sending shares of the Pennsylvania-based firm more 2% higher Tuesday.

The New York Independent System Operator, which manages the state’s grid, had said there was enough generating capacity to transition away from Canadian sources.

A spokesperson for Michigan’s Public Service Commission told The Associated Press on Monday that the impact on the state’s residents was likely to be “small.” Minnesota Gov. Tim Walz — Kamala Harris’ 2024 running mate — likewise expected minimal impact for his state.

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Stephen Collopy

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