On Tuesday, President Donald Trump escalated trade tensions with Canada, threatening new tariffs in response to Ontario’s recent export surcharge on U.S. electricity.

Stocks reacted immediately to Trump's announcement on Truth Social, with the Dow dropping 1.6%, the S&P 500 falling 1.2%, and the Nasdaq Composite declining 0.8% by mid-afternoon.

Trump pledged a reciprocal response to Ontario’s 25% surcharge on electricity exports to New York, Minnesota, and Michigan, vowing to impose a 25% tariff on Canadian electricity. This move could raise costs for American consumers, especially in northern states reliant on Canadian energy. Ontario’s surcharge, announced Monday, could increase electricity bills by $100 per month, according to Ontario Premier Doug Ford.

Additionally, Trump announced an even steeper tariff on Canadian steel and aluminum, doubling the planned rate.

“Because Ontario, Canada, has imposed a 25% tariff on electricity entering the U.S., I have directed my Secretary of Commerce to increase tariffs on all steel and aluminum from Canada to 50%,” Trump declared on social media, calling Canada “one of the highest tariffing nations anywhere in the world.”

In response, Ford threatened to halt electricity exports to the U.S. entirely.

“I want to send more electricity to our closest allies, but is cutting supply an option? 100%,” Ford told CNBC on Tuesday. “If Trump continues to harm Canadian and Ontario families, I won’t hesitate to act.”

Ford is set to discuss the issue with U.S. Commerce Secretary Howard Lutnick. Meanwhile, Mark Carney, Canada’s incoming leader, pledged to maintain pressure on the U.S.

“My government will keep tariffs in place until America treats us with respect and commits to fair trade,” Carney stated on X.

White House Press Secretary Karoline Leavitt confirmed that Trump has not yet spoken to Carney but remains open to discussions.

The uncertainty surrounding Trump’s trade policies has fueled a Wall Street selloff.

Auto and Dairy Tariffs Loom

Trump also announced he would declare a national electricity emergency in the states affected by Ontario’s surcharge.

“Can you believe Canada is using electricity—vital for innocent people’s lives—as a bargaining tool?” he wrote on Truth Social.

He further threatened to impose steep auto tariffs beginning April 2.

“These auto tariffs will effectively shut down Canada’s car manufacturing industry. Those vehicles can be built in the USA!” Trump stated.

The announcement comes just before a midnight deadline for 25% tariffs on all steel and aluminum imports. Additionally, Trump warned of a 250% tariff on Canadian dairy products, citing Canada’s high taxes on U.S. dairy, which can reach 241% on milk.

Ford acknowledged that such tariffs frustrate Trump but urged dialogue.

“This gets under his skin, but that’s why he should sit down and talk,” Ford told CNN’s Wolf Blitzer.

Economic Fallout for the U.S.

While Trump’s tariffs target Canada, they could also hurt the U.S. economy.

Canada is America’s largest supplier of iron, steel, and aluminum, providing $11.4 billion in aluminum and $7.6 billion in iron and steel last year. Canadian aluminum alone accounted for 41% of U.S. imports.

Experts warn that a 25% tariff on Canadian aluminum could cost the U.S. 100,000 jobs. William Oplinger, CEO of aluminum giant Alcoa, noted that much of his company’s production occurs in Canada before being shipped to the U.S.

Former Treasury Secretary Larry Summers called Trump’s tariffs “the worst trade policy yet,” arguing they could harm the U.S. economy amid rising recession risks.

United Steelworkers President David McCall also criticized lumping Canada with trade violators, stating, “Canada has always been a strong ally and should not be treated like bad actors that undercut our industries.”

Impact on American Consumers

Steel and aluminum are critical to many products, including cars, appliances, medical devices, infrastructure, and power lines.

Trump’s proposed auto tariffs could backfire, disrupting North America’s deeply integrated car supply chain and raising costs for U.S. manufacturers and consumers.

Higher tariffs could also increase prices for everyday goods, making Trump’s trade war with Canada a costly battle for both nations.