Trump escalates trade war, suggests Canada becomes ‘51st State’
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”.
Trump’s press secretary warned on Tuesday afternoon that there would be “grave consequences imposed on Canada” if Ontario were to sever electricity supply.
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.
The latest row erupted 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. Carney said yesterday that his country’s tariffs on the US will stay in place until “Americans show us respect”.
Following the announcement of Trump’s latest metals levies, US government borrowing costs have seen a slight rise – up 4.23 per cent on 10-year US Treasury bonds
Shockwaves from the heated tariff war continue to undermine markets, particularly in the US, where concerns are mounting over business confidence, market volatility and the chances of a recession.
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.”