President Donald Trump is once again backtracking on his trade war against Canada as markets have tumbled in part because of the latest round of tariffs.
On Tuesday, Trump wrote on Truth Social that he instructed his commerce secretary to place an additional 25% tariff on steel and aluminum coming from Canada into the US, bringing the tariff rate on those imports to 50%.
Trump said those tariffs would go into effect on Wednesday. He added in the post that he would declare a national emergency over electricity to push back on Canada's threats to shut off power in some US regions if Trump continued to enforce tariffs.
"This will allow the U.S to quickly do what has to be done to alleviate this abusive threat from Canada," Trump wrote.
However, Trump's trade advisor, Peter Navarro, told CNBC on Tuesday afternoon that the 50% tariffs on Canadian steel and aluminum would no longer go into effect on Wednesday. It follows Commerce Secretary Howard Lutnick reaching an agreement with Canada to pause a tax on electricity exports to the US.
Investors sold stocks on Trump's initial announcement of the tariffs, with the major market averages all posting midday losses that accelerated following Trump's Truth Social post. The Dow Jones Industrial Average had shed 633 points at its intraday low. That index pared its losses, closing down around 478 points .
The stocks that appeared most negatively affected by the elevated tariffs were those of automakers and industrial companies, which count steel and aluminum as major inputs.
General Motors and Ford each declined as much as 4%, while the industrials sector declined as much as about 2%.
Steelmakers' stocks appeared positively affected by the tariff news, with US Steel and Nucor both rising as much as 3%.
Tuesday's stock market sell-off extended the painful decline from Monday, when the Nasdaq composite dropped 4%, its worst day since 2022. Since the sell-off began in mid-February, the S&P 500 is down about 9%, while the Nasdaq is off by about 13%.
After Trump placed a 25% tariff on imports from Canada and Mexico on March 4, which was later suspended until April 2, Canada's Prime Minister, Justin Trudeau, said he would place a 25% retaliatory tariff on $155 billion worth of American goods until Trump's tariffs were withdrawn.
Trump said in his Truth Social post on Tuesday that if Canada did not drop its own tariffs on US goods, he would on April 2 "substantially increase" tariffs on cars coming into the US. He said this would, "essentially, permanently shut down the automobile manufacturing business in Canada." He added: "Those cars can easily be made in the USA!"
Trudeau said ahead of the first round of 25% tariffs that Americans would feel the pain from Trump's trade war.
"Because of the tariffs imposed by the U.S., Americans will pay more for groceries, gas, and cars, and potentially lose thousands of jobs," Trudeau said in a statement on March 3. "Tariffs will disrupt an incredibly successful trading relationship."
The tariffs Trump has placed on Canada, Mexico, and China have been intended to achieve the administration's policy goals — particularly cracking down on drug and border policy. Trump said on Thursday that he would be pausing tariffs on Mexican goods for one month "out of respect" for Mexico's president, Claudia Sheinbaum.
Read the original article on Business Insider