President Donald Trump has escalated his trade war with Canada, doubling tariffs on metals to 50 per cent and threatening to “substantially increase” levies on the automotive industry.
In a post on his own Truth Social network, the US President threatened to “permanently shut down the automobile manufacturing business in Canada” if Canadian retaliatory tariffs are not dropped.
Trump has offered Canada a simple way out: Join the US as its 51st state.
The US president said: “This would make all tariffs, and everything else, totally disappear.”
“Canadians’ taxes will be very substantially reduced, they will be more secure, militarily and otherwise, than ever before, there would no longer be a northern border problem.”
This latest announcement follows Ontario’s premier Doug Ford announcing counter-tariffs on electricity late on Monday – warning, “I will not hesitate to shut off electricity completely”.
Weeks into Trump’s trade war – in which the US has most heavily targeted its Northern and Southern neighbours – rolling political shocks have dented global stocks and the US economy.
This comes just a day after Mark Carney was named as the new prime minister of Canada, winning the Liberal Party leadership election by a landslide to replace Justin Trudeau.
Following the announcement of the latest metals levies, US government borrowing costs have seen a slight rise – up 4.23 per cent on 10-year US Treasury bonds
Political shockwaves have reached the UK, with the FTSE 100 seeing a 1.22 per cent dip on Tuesday.
European markets had been steadying earlier on Tuesday before this latest tariff announcement, after Monday saw the S&P 500 fall 3 per cent throughout the day.
Trump claimed on Monday that the US economy is in a “period of transition”, when asked about the possibility of imminent recession.
The Bank for International Settlements (BIS) – known as the “central bank for central banks” – says that the US will dodge recession in 2025, but that its financial system is sensitive to Trump’s outbursts.
Frank Smets, deputy head of the BIS’s monetary department, said: “Policy uncertainty on tariffs, [US] fiscal policy, immigration and regulation … work like a negative demand shock. They would have negative effects on spending, investment — and we see some signs of that.”
“If tariffs are implemented — and some have been — then the negative demand shocks can become supply shocks and give rise to inflationary pressure.”