Stock markets sink as Trump confirms tariffs on Canada, Mexico and China

U.S. President Donald Trump announced the imposition of a 25% tariff on goods imported into the United States from Canada and Mexico, stating that the time for reaching an agreement had run out. Trump had previously threatened this measure multiple times and announced it would take effect on Tuesday. This move triggered a decline in the U.S. stock market.

Concurrently, a 10% tariff is also expected to be levied on imported goods from China, meaning that the United States' three major trading partners will face higher trade barriers than they did just weeks ago. "Mexico and Canada have had their chance," Trump said at the White House on Monday. "The tariffs are set, and they go into effect tomorrow."

Following Trump's remarks, the three major U.S. stock indices all experienced declines. The Dow Jones Industrial Average closed down 1.4%, the S&P 500 Index fell 1.75%, and the Nasdaq Index dropped 2.6%. Canadian Prime Minister Justin Trudeau responded by saying, "Canada will not stand idly by in the face of this unjust decision."

Canadian Foreign Minister Mélanie Joly told reporters that Ottawa plans to impose retaliatory tariffs on US imports worth C$155 billion ($107 billion; £84 billion), with the first C$30 billion in tariffs being immediately levied on everyday items such as pasta, clothing and perfume. The Foreign Minister added that these tariffs were an "existential threat" to Canada, affecting "thousands of Canadian jobs."

China's Ministry of Commerce also vowed on Tuesday to retaliate against the new U.S. tariffs, accusing the Trump administration of attempting to "shift responsibility" and "bullying" Beijing over the issue of fentanyl inflows. In a statement, the Ministry urged the U.S. to "immediately withdraw" its tariffs, calling them "unreasonable, groundless, and harmful to others." According to China's state-run media outlet Global Times on Monday, China may take tariff and non-tariff measures against U.S. agricultural and food products.

Mexico has also indicated that it will retaliate against the U.S. tariffs, raising the possibility of an escalating trade war. Trump has threatened to impose tariffs on Canada, Mexico, and China, citing what he says is an unacceptable influx of illegal drugs and illegal immigrants into the United States. These tariffs, which are taxes imposed on products entering a country, were originally supposed to take effect last month, but the U.S. agreed to delay them for a month for Canada and Mexico, sparing the two North American neighbors from a potentially devastating trade war.

However, Trump did impose a 10% tariff on goods exported from China to the United States in February, meaning that goods from China now face tariffs of at least 20%. Trump has consistently maintained that tariffs are a useful tool for correcting trade imbalances and protecting American manufacturing. He has largely dismissed concerns about the potential economic damage these measures could inflict on the United States, despite the close ties within North America, where businesses have enjoyed decades of free trade.

"They have to build their car plants in the United States, and frankly, other plants, so they don't have to pay the tariff," he added. Canadian and Mexican officials have been in Washington in recent days trying to avoid the imposition of tariffs. Mexican President Claudia Sheinbaum said earlier on Monday during a public event in the city of Colima that "Mexico must be respected," seemingly sending a message to Trump. "Cooperation [and] coordination, yes; submission, never."

Trudeau met with King Charles in the UK on Monday, after saying he would discuss issues important to Canadians, including "defending our sovereignty and independence as a country." A day earlier, the Canadian Prime Minister stated at a summit in London that Canada is "not" the source of illegal fentanyl in the United States. According to U.S. data, only 1% of the fentanyl seized in the United States is believed to originate from Canada.

The Canada Border Services Agency (CBSA) has stated that it has been "stepping up efforts" to combat the flow of fentanyl into the United States. President Trump has also announced a 25% fee on all steel and aluminum imports, which is expected to take effect on March 12. In addition, he has threatened to impose customized "reciprocal" tariffs on individual countries, as well as a 25% tariff on the European Union.