In the latest twist in a deepening trade war, Trump said it was in retaliation for 25% tariffs Ontario placed on electricity it sends to northern US states.

Trump said if tariffs including those on agricultural products were not dropped, he would hike taxes on the car industry, “which will, essentially, permanently shut down the automobile manufacturing business in Canada”.

Ontario premier Doug Ford said: “Until the threat of tariffs is gone for good, we won’t back down.”

Ford added in a post on X that Trump had “launched an unprovoked trade and tariff war with America’s closest friend and ally”.

Writing on his social media platform Truth Social, Trump said his tariffs would go into effect on Wednesday morning, and that he would declare “a national emergency on electricity” in those states.

He also said Canada relied on the US for “military protection”, and reiterated that he wanted the country to become the 51st US state.

He add that it “would make all tariffs, and everything else, totally disappear,” if Canada were to join the US as a state.

Canadian Prime Minister-designate Mark Carney has previously said “Canada will never be part of America in any way, shape or form”.

The announcement comes during a turbulent time for markets.

The S&P 500 index of the largest firms listed in the US fell a further 0.5% on Tuesday after dropping 2.7% on Monday, which was its biggest one-day drop since December.

The UK’s FTSE 100 share index, which had edged lower earlier on Tuesday, fell further following Trump’s latest comments and was down more than 1%. The French Cac 40 index and German Dax followed a similar pattern.

Monday’s stock market sell-off had begun after Trump said the economy was in a “transition” when asked about whether the US was heading for a recession.

Investors have been concerned about the economic effects of Trump’s trade policies, which it is feared could push up inflation in the US and beyond.