Trade War with Canada Escalates – Steel & Aluminum Tariffs to Double

The trade war with Canada is escalating.

Ontario Premier Doug Ford imposed a 25% tariff on electricity to the U.S., which Michigan, New York, and Minnesota import. The premier had promised to do this in retaliation to President Trump’s 25% tariffs on Canadian goods.

Jennifer Cowan reports in the Epoch Times:

Ontario Premier Doug Ford has followed through on his pledge to impose a 25 percent tariff on electricity exported to the United States in response to the tariffs enacted on Canadian products by President Donald Trump.

The export tax on the energy Ontario sends to New York, Michigan, and Minnesota comes into force today, bumping up the cost of electricity for 1.5 million households and businesses in those states, Doug Ford said during a March 10 press conference in Toronto.

Premier Ford claims the tariff will add roughly $100 per month to Americans’ bills.

While President Trump did exempt products under the United States-Mexico-Canada Agreement (USMCA), which Cowan’s article notes is around 38% of the goods the U.S. imports from Canada, most moves since the implementation of America’s 25% tariff on Canadian goods has been escalation.

Cowan recapped Canada’s initial retaliation to the new tariffs:

Canada has responded by placing $30 billion worth of tariffs on American goods last week, while Ontario has pulled all American alcohol from its provincially run liquor stores and put an end to procurement opportunities for U.S. companies.

President Trump does not have a tendency to back down in trade wars. Today, he responded to Ontario’s electricity tariff by announcing he’ll double tariffs on steel and aluminum from Canada, which will go into effect tomorrow (March 12th). He made the announcement today on Truth Social:

Based on Ontario, Canada, placing a 25% Tariff on “Electricity” coming into the United States, I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD. This will go into effect TOMORROW MORNING, March 12th….

In the post, President Trump announced he’ll declare a national emergency on electricity in the areas that import it from Canada to alleviate the threat of $100 per month increases Ontario’s premier says his tariff will cost Americans in their electricity bills:

I will shortly be declaring a National Emergency on Electricity within the threatened area. This will allow the U.S to quickly do what has to be done to alleviate this abusive threat from Canada.

However, President Trump’s complaints with Canada go well beyond the new retaliatory tariffs from the country. He points to enormous tariff numbers on dairy products as an example of long-time “egregious” tariffs from Canada. If Canada doesn’t drop such tariffs, President Trump threatens to increase tariffs on cars from Canada so substantially that it will essentially end the automobile manufacturing industry in Canada. That tariff hike would happen on April 2nd when the Trump Administration is set to implement reciprocal tariffs, designed to increase U.S. tariffs on countries whose taxes on imports from the U.S. are greater than those the U.S. imposes on goods from them.

Also, Canada must immediately drop their Anti-American Farmer Tariff of 250% to 390% on various U.S. dairy products, which has long been considered outrageous…. [the excerpt above about a national emergency on electricity was here] If other egregious, long time Tariffs are not likewise dropped by Canada, I will substantially increase, on April 2nd, the Tariffs on Cars coming into the U.S. which will, essentially, permanently shut down the automobile manufacturing business in Canada. Those cars can easily be made in the USA!

President Trump doesn’t stop there but claims that through United States military protection (or possibly just including that), the U.S. is subsidizing our neighbor to the north by more than $200 billion a year. It’s another thing he says has to stop before joking about making Canada a U.S. state, which–of course–would be an end to tariffs between the countries. Then he goes on to list benefits of Canada becoming part of the U.S., which is almost enough to make someone think there is a tinge of seriousness to the idea:

Also, Canada pays very little for National Security, relying on the United States for military protection. We are subsidizing Canada to the tune of more than 200 Billion Dollars a year. WHY??? This cannot continue. The only thing that makes sense is for Canada to become our cherished Fifty First State. 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, and the greatest and most powerful nation in the World will be bigger, better and stronger than ever — And Canada will be a big part of that. The artificial line of separation drawn many years ago will finally disappear, and we will have the safest and most beautiful Nation anywhere in the World — And your brilliant anthem, “O Canada,” will continue to play, but now representing a GREAT and POWERFUL STATE within the greatest Nation that the World has ever seen!

In a post today, President Trump suggested Ontario’s “surcharge” on electricity was illegal, saying you’re not allowed to do that. However, he didn’t say the U.S. would go about stopping the electricity tariff via a legal challenge. He said we’d get it all back with reciprocal tariffs on April 2nd.

In that Truth Social post, the president called Canada a tariff abuser, adding the country always has been, having already brought up Canada’s 250% to 390% tariffs on many U.S. farm products. But the big addition that shippers should be aware of in this second post from President Trump is that he brings up lumber along with cars as an import from China the U.S. doesn’t need.

That means, at this point, shippers should expect to see significant tariff hikes on lumber come April 2nd, in addition, and maybe similar, to what he threatened regarding Canadian cars.

Here’s the president’s full post:

Despite the fact that Canada is charging the USA from 250% to 390% Tariffs on many of our farm products, Ontario just announced a 25% surcharge on “electricity,” of all things, and your not even allowed to do that. Because our Tariffs are reciprocal, we’ll just get it all back on April 2. Canada is a Tariff abuser, and always has been, but the United States is not going to be subsidizing Canada any longer. 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. MAKE AMERICA GREAT AGAIN!!!

President Trump is committed to his tariff strategy. He’s said repeatedly he thinks it’ll be great for the country and it will bring wealth back to the country, but he also said just days ago that it will take a little time and there will be a transition period.

The president’s goals appear to be long-term. In the short-term, there could be a bumpy ride with tariffs and trade wars as no country will like seeing tariff hikes on their goods headed for the U.S.

In good news for U.S. shippers, as tariffs hikes are starting to hit, transpacific freight rates are dropping, as reported by Stuart Chirls in a FreightWaves article:

The seasonal lull and end to frontloading by importers is driving down container rates on trans-Pacific transits to the United States.

…

Asia-U.S. West Coast rates fell by 18% to $3,558 per forty-foot equivalent unit, according to the Freightos Baltic Index for the week ending Feb. 28. Asia-U.S. East Coast prices dropped 21% to $4,490 per FEU.

Shippers trying to import goods before tariffs hit increased demand over the last several months, which also decreases demand even lower than a seasonal lull would normally create now.

Lower demand and lower freight rates could help ease some of that “transitional period” of these early trade wars. If President Trump’s policy increases U.S. production and domestic sourcing, that could have an impact on shipping demand and freight rates as well.

On that end, the Trump Administration received good news in light of its policies to penalize Chinese shipbuilding and incentivize U.S. shipbuilding, as CMA CGM announced last week it will be investing $20 billion in the U.S. shipping sector. Eric Kulisch reported in a FreightWaves article:

France-based container shipping and logistic giant CMA CGM Group on Thursday announced it will invest $20 billion over four years in its U.S.-flag fleet, port terminals, an air cargo airline based in Chicago and warehouses to align with President Donald Trump’s goal of increasing America’s domestic shipbuilding and maritime transportation capacity.

There are plenty of predictions, positive and negative, as to how President Trump’s tariff policies will play out. Ultimately, it’ll have to be something watched carefully for it’s short-term effects and seen over time for the long-term ones.

In the meantime, we’ll continue covering what’s happening with tariffs here in Universal Cargo’s blog. And as always, our international shipping experts are ready to help you with all of your business’s importing and exporting needs.