On March 11, 2025, President Donald Trump escalated trade tensions with Canada by announcing a significant increase in tariffs on Canadian steel and aluminum imports. The new measures raise the tariffs from 25% to 50%, effectively doubling the previous rates. This decision was a direct response to Ontario’s implementation of a 25% surcharge on electricity exports to U.S. states such as New York, Michigan, and Minnesota.
The imposition of these tariffs has had immediate and noticeable effects on the U.S. stock market. Shares of major U.S. steel and aluminum producers, including Alcoa, experienced increases, with Alcoa’s stock rising by 2.7%. However, the broader market faced declines, influenced by investor concerns over the potential economic repercussions of the heightened trade tensions.
In retaliation to the U.S. tariffs, Canada had previously imposed 25% tariffs on American goods, citing demands to address issues related to fentanyl trafficking and illegal immigration. Prime Minister Justin Trudeau has warned that further escalation could lead to higher consumer prices and job losses in both countries. He emphasized the potential risks to the U.S. economy, particularly if Canada were to reduce electricity supplies in response to the new tariffs.
The trade dispute has also led to significant fluctuations in the stock market. Major indices, including the S&P 500 and the Nasdaq, experienced declines, reflecting investor apprehension about the economic impact of the trade war. The automotive and industrial sectors were particularly affected, given their reliance on Canadian steel and aluminum.
In an effort to de-escalate the situation, Ontario’s Premier, Doug Ford, announced the suspension of the 25% surcharge on electricity exports to the U.S. This decision came after discussions with U.S. Commerce Secretary Howard Lutnick, who agreed to negotiations aimed at resolving the trade disputes. President Trump acknowledged this gesture but maintained that the tariffs would remain in place until Canada addresses broader trade concerns.
The origins of the current trade conflict trace back to February 2025, when President Trump imposed a 25% tariff on all Canadian and Mexican goods, excluding oil and energy, which were subject to a 10% tariff. Trump justified these measures as necessary to address illegal immigration and the flow of illicit drugs, particularly fentanyl, across the U.S.-Canada border. Both Canada and Mexico criticized these tariffs as unjustified and a violation of the United States-Mexico-Canada Agreement (USMCA).
Economists warn that the ongoing trade war could disrupt supply chains and lead to increased consumer prices across North America. The heightened tariffs on steel and aluminum imports are particularly concerning, given that Canada is a major supplier of these materials to the U.S. The situation remains fluid, with potential for further escalation or negotiation, depending on the actions of both the U.S. and Canadian governments in the coming weeks.
