Ontario’s Electricity Tariff Threat Forces Trump to Back Down

Ontario’s Electricity Tariff Threat Forces Trump to Back Down

As Canada undergoes a leadership transition, Ontario Premier Doug Ford has emerged as a formidable trade negotiator against President Donald Trump.

On March 11, President Trump announced on Truth Social that he had directed the U.S. Treasury Department to increase tariffs on Canadian aluminum and steel to 50%, in response to Ontario’s plan to impose a 25% surcharge on electricity exports to the U.S.

Just hours later, the White House reversed course, stating that Trump had decided to keep tariffs at 25%, matching the rate applied to other U.S. trade partners.

Trump’s Sudden Reversal—Ford’s Role in the Negotiation

The quick turnaround came after U.S. Commerce Secretary Howard Lutnick engaged in emergency talks with Ontario’s Premier Doug Ford, instead of contacting Canada’s federal officials.

Ford, who secured his third term as Ontario’s Premier in February, had previously threatened to impose retaliatory measures on electricity exports to the U.S., targeting Minnesota, New York, and Michigan. He warned of not just surcharges but also a complete suspension of electricity exports.

It was only after Lutnick invited Ford to Washington for direct trade talks that the Ontario leader agreed to temporarily suspend the electricity tariff plan.

Although the White House framed this as a diplomatic win, Trump acknowledged the leverage Ontario held.

"There’s a very strong person in Canada who said he was going to impose an electricity surcharge on us. Then he called and said he wouldn’t do it anymore. And that’s really good—because the consequences would have been terrible," Trump said during a White House event with Tesla.

Ontario’s Power Over U.S. Trade Talks

Ontario, Canada’s most populous province with 16 million residents, accounts for 40% of the nation’s GDP and is home to major industries like automotive, manufacturing, and technology. It also supplies electricity to Minnesota, New York, and Michigan—three key industrial states in the U.S.

Although Canada’s Constitution grants trade and tariff authority to the federal government, provincial premiers can still impact international trade by leveraging local regulations and economic policies.

Ontario bypassed the national government by introducing an executive order through the province’s Ministry of Energy, mandating that the Independent Electricity System Operator (IESO) collect a "Tariff Response Fee" from electricity producers exporting power to the U.S. The surcharge was designed to fluctuate based on U.S. trade measures.

Ford had initially planned to seek provincial legislative approval, but his government used an executive directive to fast-track the measure, as Ontario’s newly elected legislature won’t convene until April.

"We can raise or lower the electricity surcharge at any time to counter U.S. trade actions," Ontario Energy Minister Stephen Lecce stated, noting that Ontario exports 31 times more electricity to the U.S. than it imports.

Ford’s Track Record in Trade Retaliation

Ontario has previously used similar tactics against U.S. industries.

  • Alcohol Tariffs: The Liquor Control Board of Ontario (LCBO), the world’s largest alcohol purchaser, removed all American wines from store shelves, costing U.S. winemakers $1 billion.

  • Procurement Bans: Ontario blocked U.S. firms from bidding on $30 billion in provincial contracts.

  • SpaceX Contract: Ford threatened to terminate a $100 million deal with SpaceX, which provides Starlink satellite internet to rural Ontario.

A full suspension of electricity exports, however, would be more complex due to existing agreements with U.S. states and other Canadian provinces.

While nuclear power plants can’t easily reduce output, Ford suggested Ontario could limit hydroelectric production, which would have an immediate impact on U.S. states dependent on Canadian electricity.

Ontario’s electricity surcharge could cost the U.S. up to $400,000 per day. Ford dismissed concerns about the relatively small economic impact, arguing that rising electricity prices would create swift political pressure in American households.

"Electricity pricing affects every single household," Ford stated. "Residents of Minnesota, New York, and Michigan would feel the effects immediately. This is a trade battle we can take straight to American kitchens."

Trump Acknowledges Ontario’s Leverage

Speaking on March 12, Trump admitted Ontario’s tariff threats posed real risks.

"We had trouble with Ontario. Luckily, they backed down once I made it clear how we’d respond. You don’t mess with electricity. It impacts people’s lives. It’s life and death," Trump said during a meeting with Irish Prime Minister Leo Varadkar at the White House.

Ford’s Next Move

Ford described the March 13 trade meeting in Washington as a "peace offering" from the U.S., confirming that Ontario would suspend the electricity surcharge for now.

However, he warned that if negotiations fail, Ontario could reinstate the surcharge or escalate retaliatory measures.

"In any negotiation, tensions will rise. But what matters is knowing when to push and when to pull back. They understand we’re serious about using electricity tariffs to respond to U.S. trade policies. Instead of threats, we’re now sitting down to find solutions," Ford concluded.

(Sources: Radio Canada, CBC, Globe and Mail, Global News)

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