Donald Trump briefly threatened to escalate his trade war with Canada by doubling his planned tariffs on its steel and aluminium from 25% to 50%.

The US president stepped back from his order after the provincial government of Ontario rowed back on a plan to charge 25% more for electricity it supplies to over 1.5 million American homes and businesses.

Canada’s most populous province provides electricity to Minnesota, New York and Michigan.

As a result, White House trade adviser Peter Navarro said Mr Trump would not double steel and aluminium tariffs – but the federal government still plans to place a 25% tariff on all steel and aluminium imports from Wednesday.

Ontario’s response

In his initial response to Mr Trump’s threat, Ontario’s premier Doug Ford said he would not back down until the US leader’s tariffs on Canadian imports were “gone for good”.

But he later suspended the change temporarily, saying “cooler heads need to prevail” and he was confident the US president would also stand down on his plans.

Meanwhile, Canada’s incoming prime minister Mark Carney said he will keep other tariffs in place until Americans “show respect” and commit to free trade.

Mr Carney called the new tariffs threatened by Mr Trump an “attack” on Canadian workers, families and businesses.

Read more:
Analysis: Uncertainty index spikes amid on/off confusion over Trump tariffs

Why is Trump threatening tariffs?

A worldwide 25% tariff on steel and aluminium is due to come into effect on Wednesday as a way to kickstart US domestic production.

Separate tariffs on goods from Mexico and Canada covered by a previous trade agreement (the US Mexico Canada, or USMCA deal) were delayed by a month to 2 April.

President Trump seems to bear a particular grudge against Canada because of what he sees as rampant fentanyl smuggling and high Canadian taxes on dairy imports, which penalise US farmers.

He has called for Canada to become part of the United States as its “cherished 51st state” as a solution, which has angered Canadian leaders.

Economic impact

Mr Trump’s turnaround comes after markets fell in response to his threat of doubling tariffs.

The stock market has fallen over the last two weeks and Harvard University economist Larry Summers put the odds of a recession at 50-50.

“All the emphasis on tariffs and all the ambiguity and uncertainty has both chilled demand and caused prices to go up,” the former treasury secretary for the Clinton administration posted on X on Monday.

“We are getting the worst of both worlds – concerns about inflation and an economic downturn and more uncertainty about the future and that slows everything.”

Investment bank Goldman Sachs revised down its growth forecast for this year from 2.2% to 1.7% and moderately increased its recession probability to 20% “because the White House has the option to pull back policy changes if downside risks begin to look more serious”.

Mr Trump has tried to reassure the American public that his tariffs will cause a bit of a “transition” to the economy as taxes spur more companies to begin the years-long process of relocating factories to the US to avoid tariffs.

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Trump refuses to rule out recession

Mr Trump did not rule out the possibility of a recession during an interview with Fox News on Sunday, where he said: “I hate to predict things like that.”

On Tuesday, he was asked about a potential recession and said “I don’t see it at all” and claimed the US is “going to boom”.

On Monday, the S&P 500 stock index fell 2.7% and on Tuesday it was around 10% below its record set last month.

Donald Trump briefly threatened to escalate his trade war with Canada by doubling his planned tariffs on its steel and aluminium from 25% to 50%.

The US president stepped back from his order after the provincial government of Ontario rowed back on a plan to charge 25% more for electricity it supplies to over 1.5 million American homes and businesses.

Canada’s most populous province provides electricity to Minnesota, New York and Michigan.

As a result, White House trade adviser Peter Navarro said Mr Trump would not double steel and aluminium tariffs – but the federal government still plans to place a 25% tariff on all steel and aluminium imports from Wednesday.

Ontario’s response

In his initial response to Mr Trump’s threat, Ontario’s premier Doug Ford said he would not back down until the US leader’s tariffs on Canadian imports were “gone for good”.

But he later suspended the change temporarily, saying “cooler heads need to prevail” and he was confident the US president would also stand down on his plans.

Meanwhile, Canada’s incoming prime minister Mark Carney said he will keep other tariffs in place until Americans “show respect” and commit to free trade.

Mr Carney called the new tariffs threatened by Mr Trump an “attack” on Canadian workers, families and businesses.

Read more:
Analysis: Uncertainty index spikes amid on/off confusion over Trump tariffs

Why is Trump threatening tariffs?

A worldwide 25% tariff on steel and aluminium is due to come into effect on Wednesday as a way to kickstart US domestic production.

Separate tariffs on goods from Mexico and Canada covered by a previous trade agreement (the US Mexico Canada, or USMCA deal) were delayed by a month to 2 April.

President Trump seems to bear a particular grudge against Canada because of what he sees as rampant fentanyl smuggling and high Canadian taxes on dairy imports, which penalise US farmers.

He has called for Canada to become part of the United States as its “cherished 51st state” as a solution, which has angered Canadian leaders.

Economic impact

Mr Trump’s turnaround comes after markets fell in response to his threat of doubling tariffs.

The stock market has fallen over the last two weeks and Harvard University economist Larry Summers put the odds of a recession at 50-50.

“All the emphasis on tariffs and all the ambiguity and uncertainty has both chilled demand and caused prices to go up,” the former treasury secretary for the Clinton administration posted on X on Monday.

“We are getting the worst of both worlds – concerns about inflation and an economic downturn and more uncertainty about the future and that slows everything.”

Investment bank Goldman Sachs revised down its growth forecast for this year from 2.2% to 1.7% and moderately increased its recession probability to 20% “because the White House has the option to pull back policy changes if downside risks begin to look more serious”.

Mr Trump has tried to reassure the American public that his tariffs will cause a bit of a “transition” to the economy as taxes spur more companies to begin the years-long process of relocating factories to the US to avoid tariffs.

👉 Follow Trump 100 on your podcast app 👈

Trump refuses to rule out recession

Mr Trump did not rule out the possibility of a recession during an interview with Fox News on Sunday, where he said: “I hate to predict things like that.”

On Tuesday, he was asked about a potential recession and said “I don’t see it at all” and claimed the US is “going to boom”.

On Monday, the S&P 500 stock index fell 2.7% and on Tuesday it was around 10% below its record set last month.

Elon Musk said today that Tesla will double its electric vehicle production in the US in the next two years.

What would that look like? Let’s do the math.

Today, during a press conference to promote Tesla at the White House, Tesla CEO Elon Musk said the following:

“As a function of the great policies of President Trump and his administration, and as an act of faith in America, Tesla is going to double vehicle output in the United States within the next two years.”

This raises many questions, as Musk’s phrasing of the statement suggests that Tesla is planning to add previously unannounced production capacity in response to Trump’s policies.

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However, the reality could be different.

What is Tesla’s current production capacity in the US?

We only know Tesla’s installed capacity, which is much different than its actual production rate.

This is Tesla’s latest disclosed global production capacity at the end of 2024:

In the US, it adds up to 1,025,000 vehicles per year.

In reality, Tesla’s factories are operating at a much lower capacity.

Based on sales and inventory from 2024, Tesla is currently building fewer than 50,000 Model S/X vehicles per year compared to an installed capacity of 100,000 units.

As for Model 3 and Model Y, Tesla is currently building them in the US at a rate of about 600,000 units per year compared to claimed installed capacity of over 800,000 units.

Finally, the Cybertruck is being produced at a rate of less than 50,000 units per year compared to an installed capacity of over 125,000 units.

This adds up to Tesla producing 700,000 units per year in the US in 2024.

What will be Tesla’s new capacity?

Considering Musk mentioned that it will happen “within the next two years”, it is unlikely that he is referring to installed capacity.

The CEO is most likely talking about Tesla’s actual production, which would also make sense, especially considering he mentioned “output.”

Tesla currently outputs roughly 700,000 vehicles per year in the US.

Doubling that would mean bringing the total to 1.4 million units per year, which would be an incredible feat, but it’s not entirely a new plan for Tesla.

First off, Tesla has already announced plans to unveil two new, more affordable models this year. These models are going to be built on the same production lines as Model 3/Y, which would potentially enable Tesla to fully utilize its installed capacity for those vehicles.

That’s another 200,000 units already.

As already mentioned in Tesla’s installed capacity table, the company is currently developing its production facility for the Tesla Semi electric truck in Nevada.

Production is expected to start later this year and ramp up next year. Tesla has previously mentioned a goal of 50,000 units per year. It would leave Tesla roughly a year and half to ramp up to this capacity, which is ambitious, but not impossible.

Then there’s the “Cybercab”, which was unveiled last year.

The Cybercab is going to use Tesla’s next-gen vehicle platform and new manufacturing system, which is already being deployed at Gigafactory Texas.

Production is expected to start in 2026, and Musk has mentioned a production capacity of “at least 2 million units per year”. However, he said that this would likely come from more than one factory and it’s unclear if the other factory would be in the US.

Either way, Tesla would need to ramp up Cybercab production in the US to 450,000 units to make Musk’s announcement correct.

It’s fair to note that all of this was part of Tesla’s plans before the US elections, Trump’s coming into power, or the implementation of any policies whatsoever.

Electrek’s Take

Based on my analysis, this announcement is nothing new. It’s just a reiteration of Elon’s plans for Tesla in the US, which were established long before Trump came to power or even before Elon officially backed Trump.

It’s just more “corporate puffery” as Elon’s lawyers would say.

Also, if I wasn’t clear, we are only talking about production here. I doubt Tesla will have the demand for that, especially if Elon remains involved with the company.

The Cybercab doesn’t even have a steering wheel, and if Tesla doesn’t solve self-driving, it will be hard to justify producing 450,000 units per year.