U.S. President Donald Trump eased back on his recent trade threat on Canada shortly after making it, while attempting to downplay the likelihood of an economic recession spurred by tariffs that have significantly impacted U.S. markets.
Trump initially threatened to raise tariffs on Canadian steel and aluminum to 50% on Tuesday, following Ontario’s announcement of a planned surcharge on electricity exported to the U.S. However, the U.S. president later reverted to the existing 25% tariffs after Ontario rescinded its decision.
This incident added to the jitters within markets already anxious about looming global metal tariffs set to take effect soon—reflecting the uncertain and impulsive nature of the tariff measures that have unsettled investors and business leaders over recent weeks.
Major U.S. stock indexes have collectively fallen about 10% from their highs amidst growing fears of an economic slowdown in the country. Recently, in an interview with Fox News, Trump had not dismissed the possibility of a recession.
During a late Tuesday briefing at the White House, Trump adopted a more optimistic tone when asked about a potential economic downturn, expressing confidence in the nation’s economic prospects. He also downplayed the recent market volatility, suggesting that fluctuations are a natural part of market behavior.
Despite his reassuring statements, Trump later addressed executives at a Business Roundtable meeting, suggesting that more tariffs could be on the horizon, potentially even higher than current rates, as a strategy to encourage companies to relocate their operations to the U.S.
He emphasized that while tariffs generate significant revenue, the ultimate goal is for companies to produce domestically, offering incentives such as tax benefits for businesses manufacturing in the United States.
Trump’s broader economic approach, including potential mass deportations and efforts to streamline federal operations, adds another layer to the risks facing U.S. economic growth. Economists warn that tariffs will lead to higher consumer prices, invite retaliatory measures damaging to U.S. exporters, and collectively could impede economic progress.
While addressing Congress, Trump has acknowledged potential disruptions stemming from his comprehensive economic agenda, aimed at revitalizing domestic manufacturing while reducing the federal government’s size. Treasury Secretary Scott Bessent and other advisors have also hinted at forthcoming challenges.
Despite these unfolding dynamics, most economists do not predict an immediate recession in the U.S., although certain warning signs are evident, including softer consumer spending and a dip in business confidence. The job market saw continued strength last month, although unemployment ticked up slightly to 4.1%. Meanwhile, ongoing efforts to trim down federal operations add another layer of employment concerns.
