Trump doubles tariffs on Canadian steel and aluminum to 50%

US President Donald Trump on Tuesday ramped up a burgeoning trade war with Canada, saying he will double tariffs set to take effect within hours on all imported steel and aluminum products from Canada to 50%, amplifying a focus on tariff increases that has sent financial markets reeling and business leaders ringing alarm bells about weakening consumer demand.

Trump's latest salvo was in response to the premier of Ontario's announcement that he would place a 25% surcharge on the electricity Canada's most populous province supplies to 1.5 million US homes unless Trump drops all of his tariff threats against the northern US neighbor.

In a post on his Truth Social media platform, Trump said he has instructed Commerce Secretary Howard Lutnick to add an additional 25% tariff on the metals products from Canada that will go into effect on Wednesday morning. Tariffs totaling 25% on all imported steel and aluminum products originating from other countries will start that day.

Trump further lashed out at Canada for trade protections it has in place on dairy and other agricultural products, and he threatened to "substantially increase" tariffs on cars coming into the US that are set to take effect on April 2 "if other egregious, long time Tariffs are not likewise dropped by Canada."

Ontario Premier Doug Ford was not bowed.

"We will not back down. We will be relentless. I apologize to the American people that President Trump decided to have an unprovoked attack on our country," Ford told MSNBC after Trump's announcement. About 1.5 million homes and businesses in New York state, Michigan and Minnesota are powered by the province's utilities, and Trump said he would declare a national emergency to mobilize resources to assist the affected areas.

The latest escalation occurred at a time when there is effectively a power vacuum in Ottawa. Prime Minister Justin Trudeau is stepping down and is due to formally hand over power to his successor Mark Carney this week. Carney, who overwhelmingly won the leadership race of the ruling Liberals last weekend, told reporters on Monday he could not speak to Trump until he had formally been sworn in as prime minister.

Trump's broadside delivered another painful jolt to financial markets, with the benchmark S&P 500 index sliding more than 1.0% as investors worry the import taxes will hurt US growth and rekindle inflation. The Toronto Stock Exchange's S&P/TSX Composite index was down about 0.6% and the Canadian dollar fell to a one-week low against the greenback.

Since hitting a record high about a month after Trump's inauguration, the S&P 1500 index - among the widest measures of the US stock market - has lost at least $5 trillion in value, a blow to wealth that could also stymie household spending.

Trump is set to meet later on Tuesday with about 100 chief executives of US firms as evidence grows that his trade policies are posing a downside risk to the economy, threatening to dash a "soft landing" that until recently appeared as the base case and reignite inflation.

Whether any of them will be willing to raise such concerns directly with Trump is unknown. Ahead of the gathering, however, businesses ranging from airlines to department stores said his fast-shifting trade policies are starting to have a chilling effect across many industries, as consumers pull back on purchases of everything from basic goods to travel.

Confidence takes a hit

Broader 25% levies on all steel and aluminum imported to the US from anywhere are due to take effect early on Wednesday, and another round of tariffs on autos as well as tit-for-tat reciprocal tariffs are lined up for early April. Canada and China have retaliated with their own tariffs on US exports, while Mexico stopped short of retaliation after Trump delayed his planned levies on the southern US neighbor.

The metals tariffs will apply to millions of tons of steel and aluminum imports from Canada, Brazil, Mexico, South Korea and other countries that had been entering the US on a duty-free basis under carve-outs. Trump has vowed that the tariffs will be applied "without exceptions or exemptions" in a move he hopes will aid the struggling US industries.

Trump's promise to double the metals levies on Canada sent some aluminum prices soaring. Price premiums for aluminum on the US physical market climbed to a record high above $990 a metric ton on Tuesday.

Trump's hyper-focus on tariffs since taking office in January has rattled investor, consumer and business confidence in ways that economists increasingly worry could cause a recession. A small business survey on Tuesday showed sentiment weakening for a third straight month, fully eroding a confidence boost following Trump's November 5 election victory, and a survey of households by the Federal Reserve Bank of New York on Monday showed consumers growing more pessimistic about their finances, inflation and the job market.

Reuters polls of economists last week showed risks to the Mexican, Canadian and US economies are piling up amid a chaotic implementation of U.S. tariffs that has created deep uncertainties for businesses and decision-makers. The surveys showed 70 of 74 economists polled across Canada, the US and Mexico judged that the risk of a recession had increased, and upside risks to inflation in the US rose in particular.

Speaking after the close of trading market on Monday, Delta Air Lines CEO Ed Bastian warned that economic worries among consumers and businesses were already hurting domestic travel.

"We saw companies start to pull back. Corporate spending started to stall," Bastian told CNBC. "Consumers in a discretionary business do not like uncertainty."