WASHINGTON — President Donald Trump dialed back his latest trade war threat against Canada hours after making it, while downplaying the risk of a tariff-led recession that has sent U.S. markets into a nosedive.

Trump’s roller-coaster day saw him threaten to double duties on Canadian steel and aluminum to 50% after Ontario announced plans to place a surcharge on electricity sent to the United States, only to retreat back to plans for his previously announced 25% rate after the provincial government backed down.

The episode rattled markets already bracing for the worldwide metal levies set to hit at midnight, and encapsulated the frantic and mercurial tariff barrage that has spooked investors and befuddled corporate leaders over the past six weeks. Major stock indexes were down some 10% off their peaks amid escalating concerns that the world’s biggest economy may be about to stall. Trump himself fueled the recession talk as recently as Sunday, declining to rule out the possibility in a Fox News interview.

At the White House late Tuesday, he struck a more upbeat note when asked if he was worried about a downturn. “I don’t see it at all. I think this country’s going to boom,” he said. And he played down the slump on markets too. They’re “going to go up and they’re going to go down,” Trump said. “Doesn’t concern me.”

Still, only hours later he told top executives gathered at a meeting of the Business Roundtable to brace for more tariffs, saying rates could even go higher. The president said increased levies simply meant it was “more likely” companies would move their operations inside the U.S.

“The biggest win is not the tariff — that big win is a lot of money — but the biggest win is if they move into the country and produce,” Trump said.

While other Trump policies could threaten U.S. growth too, including the threat of mass deportations and Elon Musk’s moves to slash federal jobs and spending, the escalating trade war has been front and center of risk assessments. Economists say it will hike prices for consumers; retaliation will hurt U.S. exporters; and all of this could add up to a drag on growth.

The three chief targets so far — China, Mexico and Canada — are the biggest U.S. trade partners. On Tuesday, it was the latter that found itself in the crosshairs.

Apparently angered by Canada’s plans to retaliate, with tariffs on U.S. dairy products and other goods plus higher prices for electricity exports, Trump threatened to double the metals charge on his northern neighbor. He also warned of dramatic additional hikes if Ottawa didn’t relent on some of its own protectionist policies intended to protect the country’s dairy industry.

The coming levies would “essentially, permanently shut down the automobile manufacturing business in Canada,” Trump said.

A few hours later, Trump’s Commerce Secretary Howard Lutnick and Ontario Premier Doug Ford announced plans to meet Thursday in Washington, and that the province would suspend its plans to slap a surcharge on electricity.

“When you’re negotiating with someone and they’re not paying attention and they disagree, the president, who is the best dealmaker ever, has to say, ‘Here’s my response,’” Lutnick said in an interview with CBS News.

U.S. stocks pared losses after that, but the S&P still closed down on the day, extending this week’s loss to around 3.5%, while treasuries also fell.

It’s likely only a respite in the trade war escalation, with the 25% charge on imports of steel and aluminum set to hit at midnight, and a whole wave of them lined up next month. That includes “reciprocal” duties — matching what the U.S. sees as trade barriers imposed by other countries — and separate tariffs on a wide range of specific products, from autos and semiconductors to lumber.

It’s the shifting and unpredictable nature of Trump’s second-term trade war — and the extent that decisions rest on the whims of the president — that’s proving especially disruptive for industry and markets. Tuesday wasn’t the first time he has whipsawed markets with on-again, off-again tariffs.

Over recent weeks, he imposed 25% duties on Canadian and Mexican goods, then delayed them for a month, then let them take effect last week, then within days offered exemptions that could cover most trade with the countries.

“It’s dramatically different than the first administration,” said Marc Short, who served as chief of staff to Vice President Mike Pence back then. “One of the biggest challenges is, markets look at it and say, you know, this is just part of his bluster, right?” Short said. “That it’s just negotiation. And it’s not.”

Corporate chiefs have been raising red flags. Canada is the main source of aluminum for U.S. industry, and several of the Ontario-based auto plants Trump was threatening to shut down are owned by U.S. automakers.

Addressing Congress last week, Trump acknowledged that the major economic overhaul he’s pursuing — to bring manufacturing jobs back to the U.S. and shrink the federal government’s role — may cause a degree of disruption. Aides including Treasury Secretary Scott Bessent have also suggested that there’ll be some pain.

Retaliation by other countries to Trump’s tariffs could worsen the blow. Ontario sells electricity to states including New York, so additional taxes would add to pressure on U.S. household budgets already strained by persistent inflation.

Most economists don’t see an imminent U.S. recession risk. But there are some warning signals, from weaker consumer spending and sentiment to a spike in uncertainty among small businesses. Hiring across the economy stayed solid last month, but the jobless rate ticked up to 4.1%. Musk’s efforts to slim down the federal bureaucracy add another employment risk.

Trump says that initiative will bring growth to the private sector, and he defended it again Tuesday.

“We had some little hiccups, not big hiccups,” Trump said. “But we saved a tremendous amount of money into the future.”

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(With assistance from Joe Deaux, Shawn Donnan, Brian Platt, Derek Decloet, Hadriana Lowenkron and Laura Davison.)

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