Donald Trump has briefly threatened to increase his trade war with Canada by doubling his planned rates on his steel and aluminum from 25% to 50%.
The US president returned from his order after the provincial government rezoned ontario on a plan to charge 25% more for electricity that delivered it to more than 1.5 million US homes and businesses.
Canada Most populated province offers electricity to Minnesota, New York and Michigan.
As a result, White House trade adviser Peter Navarro said that Mr. Trump will not double steel and aluminum tariffs, but that the federal government will place another 25% tariff of all steel and aluminum imports on Wednesday.
Donald Trump with Elon Musk in a Tesla after promising to buy one of the electric cars. Photo: Reuters
Ontario’s response
In his initial response to the threat of Mr. Trump, Ontario’s Prime Minister Doug Ford said he would not return until the US leader’s rates on Canadian import is “good away”.
But he later suspended the change temporarily, saying that “cooler heads should prevail” and he was confident that the US president would also amount to his plans.
Meanwhile, Canada’s incoming prime minister Mark Carney said he would hold other rates in place until the Americans show “respect” and commit them to free trade.
Mr. Carney calls the new rates provided by Mr. Trump is threatening an ‘attack’ on Canadian workers, families and businesses.
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Why do Trump threaten rates?
Mr. Trump said he placed the initial rates of 25% on Canada due to Fentanyl smuggling and high Canadian dairy imports, which punish US farmers.
He called on Canada to become part of the United States as his ‘cherished 51st state’ as a solution that angered Canadian leaders.
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What is the impact of US rates?
Economic impact
The turnaround of Mr. Trump comes after the markets have fallen in response to its threat to double rates.
The stock market has dropped over the past two weeks and Larry Summers, Harvard University Economist, has placed the chance of a recession at 50-50.
“All the emphasis on rates and all the ambiguity and uncertainty raised both chilled demand and prices,” the former Treasury Secretary of the Clinton administration posted on X on Monday.
“We get the worst of both worlds – concerns about inflation and an economic downturn and more uncertainty about the future and it delays everything.”
Investment Bank Goldman Sachs has revised its growth forecast from 2.2% to 1.7% this year and increased its recession probability to 20%, as the White House has the option to withdraw policy changes than the disadvantage risks look more serious.
Mr. Trump has tried to reassure the American public that its rates will cause a bit of “transition” to the economy, as taxes encourage more businesses to start the long -standing process of moving factories to the US to avoid rates.
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Trump refuses to exclude recession
Mr. Trump did not exclude the possibility of a recession during an interview with Fox News on Sunday, where he said, “I hate predicting such things.”
On Tuesday, he was asked about a possible recession and said, “I don’t see it at all” and claim that the US is’ going ‘tree’.
The S&P 500 stock index fell 2.7% on Monday and on Tuesday it was about 10% lower than the record set last month.
