President Donald Trump backed down from an extraordinary trade war escalation Tuesday that had threatened a massive surge in tariffs on Canadian steel and aluminum and new tariffs on Canadian electricity. In turn, Ontario paused surcharges on electricity to US customers.

After the back-and-forth tariff threats that sent markets sharply lower for a second day Tuesday, US Commerce Secretary Howard Lutnick, Canada’s Minister of Finance Dominic LeBlanc and Ontario Premier Doug Ford said they would meet Thursday to renegotiate the free trade treaty known as the USMCA.

Ontario agreed to suspend its 25% surcharge on electricity exports to Michigan, Minnesota and New York. President Donald Trump earlier on Tuesday threatened a 50% tariff on the country’s aluminum and steel, a sharp escalation in the budding trade war with Canada in retaliation for Ontario’s export surcharge. But Trump later signaled he would back down.

When a reporter asked him at a White House event if that 50% tariff would still go into effect, Trump sidestepped: “I’ll let you know,” he said. Shortly after those remarks, White House senior counselor for trade and manufacturing Peter Navarro confirmed in a CNBC interview that Trump’s threat of higher tariffs won’t be going into effect.

Instead, 25% tariffs on all steel and aluminum the US imports, including from Canada, are set to take effect at midnight on Wednesday, White House spokesperson Kush Desai told CNN in an emailed statement.

“It may go up higher,” Trump said Tuesday at an event hosted by the Business Roundtable. “The higher it goes, the more likely it is they’re going to build,” he said, referring to more companies moving their production to the US.

Markets initially fell sharply following Trump’s Truth Social post announcing his 50% tariff threat on Canadian aluminum and steel but pared their losses after the joint Lutnick-Ford statement. The Dow pared its losses but still fell after Trump said in comments outside the White House Tuesday that he didn’t care what happened to the stock market.

The Dow closed the day down 478 points, or 1.1%. The broader S&P 500 fell 0.8% and approached correction territory, when a stock falls 10% from its high. The Nasdaq Composite, already in correction, fell another 0.2%.