As a result, White House trade adviser Peter Navarro said the U.S. president pulled back on his doubling of steel and aluminum tariffs, even as the federal government still plans to place a 25% tariff on all steel and aluminum imports starting Wednesday.

The drama delivered a win for Trump but also amplified concerns about tariffs that have roiled the stock market and stirred recession risks. Tuesday’s escalation and cooling in the ongoing trade war between the United States and Canada only compounded the rising sense of uncertainty of how Trump’s tariff hikes will affect the economies of both countries.

Trump shocked markets Tuesday morning, saying the increase of the tariffs set to take effect Wednesday was a response to the 25% price hike that Ontario put on electricity sold to 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,” Trump posted on Truth Social.

Ontario Premier Doug Ford said Tuesday afternoon that U.S. Commerce Secretary Howard Lutnick called him and Ford agreed to remove the surcharge. He said he was confident that the U.S. president would also stand down on his own plans for 50% tariffs on Canadian steel and aluminum.

“He has to bounce it off the president but I’m pretty confident he will pull back,” Ford said on Trump’s steel and aluminum tariff threat. “By no means are we just going to roll over. What we are going to do is have a constructive conversation.”

After a brutal stock market selloff Monday and further jitters Tuesday, Trump faces increased pressure to show he has a solid plan to grow the economy. So far the president is doubling down on tariffs and can point to Tuesday’s drama as evidence that taxes on imports are a valuable negotiating tool, even if they can generate turmoil in the stock market.

Trump suggested Tuesday that tariffs were critical for changing the U.S. economy, regardless of stock market gyrations.

The U.S. president has given a variety of explanations for his antagonism of Canada. He has said that his separate 25% tariffs on all imports from Canada, some of which are suspended for a month, are about fentanyl smuggling and objections to Canada putting high taxes on dairy imports that penalize U.S. farmers. He also continued to call for Canada to become part of the United States, which has infuriated Canadian leaders.

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

Tensions between the United States and Canada

Incoming Canadian Prime Minister Mark Carney said his government will keep tariffs in place until Americans show respect and commit to free trade after Trump threatened historic financial devastation for his country.

Carney, who will be sworn in as Justin Trudeau’s replacement in coming days, said Trump’s latest tariffs are an attack on Canadian workers, families and businesses.

“My government will keep our tariffs on until the Americans show us respect and make credible, reliable commitments to free and fair trade,” Carney said in a statement.

Canadian officials are planning retaliatory tariffs in response to Trump’s specific steel and aluminum tariffs. Those are expected to be announced Wednesday.

Carney was referring to an initial $30 billion Canadian (US$21 billion) worth of retaliatory tariffs that have been applied on items like American orange juice, peanut butter, coffee, appliances, footwear, cosmetics, motorcycles and certain pulp and paper products.

Trump also has targeted Mexico with 25% tariffs because of his dissatisfaction over drug trafficking and illegal immigration, though he suspended the taxes on imports that are compliant with the 2020 USMCA trade pact for one month.

Asked if Mexico feared it could face the same 50% tariffs on steel and aluminum as Canada, President Claudia Sheinbaum, said, “No, we are respectful.”

Trump participated in a question and answer session Tuesday afternoon with the Business Roundtable, a trade association of CEOs that he wooed during the 2024 campaign with the promise of lower corporate tax rates for domestic manufacturers. But his tariffs on Canada, Mexico and China — with plans for more to possibly come on Europe, Brazil, South Korea, pharmaceutical drugs, copper, lumber and computer chips — would amount to a massive tax hike.

The stock market’s vote of no confidence over the past two weeks puts the president in a bind between his enthusiasm for taxing imports and his brand as a politician who understands business based on his own experiences in real estate, media and marketing.

“The tariffs are having a tremendously positive impact — they will have, and they are having.” Trump told the gathering of CEOs, saying the import taxes would cause more factories to relocate to the United States.

Worries about a recession are growing

Harvard University economist Larry Summers, President Bill Clinton’s treasury secretary, has put the odds of a recession at 50-50. The investment bank Goldman Sachs revised down its growth forecast for this year to 1.7% from 2.2% previously. It modestly increased its recession probability to 20% “because the White House has the option to pull back policy changes if downside risks begin to look more serious.”

Trump has tried to assure the public that his tariffs would cause a bit of a “transition” to the economy, with the taxes prodding more companies to begin the yearslong process of relocating factories to the United States to avoid the tariffs. But he set off alarms in an interview broadcast Sunday in which he didn’t rule out a possible recession.

The stock market slide continues

The promise of great things ahead did not eliminate anxiety, with the S&P 500 stock index tumbling 2.7% on Monday in an unmistakable Trump slump that has erased the market gains that greeted his victory in November 2024. The S&P 500 index fell roughly 0.8% on Tuesday, paring some of the earlier losses after Ontario backed down on electricity surcharges.

The Dow Jones Industrial Average lost 478 points, and the Nasdaq composite slipped 0.2%.

Trump has long relied on the stock market as an economic and political gauge to follow, only to look past it as he remains determined so far to impose tariffs. When he won the election last year, he proclaimed that he wanted his term to be considered to have started Nov. 6, 2024, on Election Day, rather than his Jan. 20, 2025, inauguration, so that he could be credited for post-election stock market gains.

Trump also repeatedly warned of an economic freefall if he lost the election.

“If I don’t win you will have a 1929 style depression. Enjoy it,” Trump said at an August rally in Pennsylvania.

By Josh Boak, Rob Gillies and Michelle L. Price. Associated Press writer Fabiola Sanchez contributed to this report from Mexico City. Gillies reported from Toronto.