Washington: U.S. President Donald Trump announced on Monday that 25% tariffs on goods from Mexico and Canada would take effect on Tuesday, sparking fears of a trade war in North America and causing financial markets to plunge. Trump’s statement led to a sharp decline in U.S. stocks during late afternoon trading, with both the Mexican peso and Canadian dollar dropping in response.
"Tariffs are coming. They need to build their car plants, and other facilities, in the United States to avoid tariffs," Trump stated at the White House. He added that there was "no room left" for a deal to avert the tariffs, which aim to curb the flow of fentanyl into the U.S.
Trump also announced that reciprocal tariffs would be imposed starting April 2 on countries that levy duties on U.S. products. Additionally, he reaffirmed his plan to increase tariffs on all Chinese imports to 20%, up from the previous 10%, in response to China’s continued shipment of fentanyl to the U.S. He criticized China for not taking "adequate steps to address the illicit drug crisis."
CEOs and economists warned that Trump’s tariffs on Canada and Mexico, which cover over $900 billion in annual U.S. imports, would severely disrupt the highly integrated North American economy. The tariffs are set to take effect at 12:01 a.m. EST on Tuesday, with Canada and Mexico facing a 25% tariff, and Canadian energy products subject to a 10% duty. Mexican officials did not immediately comment on the announcement.
Canadian Foreign Minister Melanie Joly responded by stating that Ottawa was prepared to act. "There’s a level of unpredictability and chaos coming from the Oval Office, and we will deal with it," she said.
The Dow Jones Industrial Average plummeted 649.67 points (1.48%), the S&P 500 lost 104.78 points (1.76%), and the Nasdaq Composite dropped 497.09 points (2.64%). Automaker shares also fell sharply, with General Motors down 4% and Ford declining 1.7%.
Gustavo Flores-Macias, a public policy professor at Cornell University, predicted that consumers could see price hikes within days, particularly in the automobile sector due to disrupted supply chains and increased vehicle prices.
Mexico’s Response Plans
After avoiding the first round of tariffs by deploying troops to its northern border, Mexico has intensified its anti-drug efforts and hinted at new measures on imported Chinese goods. President Claudia Sheinbaum stated that her government was calm but prepared to respond if tariffs were imposed, adding that coordination with the U.S. on trade and fentanyl trafficking has been "very good."
The Centers for Disease Control and Prevention reported that 72,776 people in the U.S. died from synthetic opioids, primarily fentanyl, in 2023. Representative Suzan DelBene, a Democrat from Washington, criticized the tariffs, warning they would cost American families thousands of dollars at grocery stores, gas stations, and pharmacies. She argued that "no president should be able to raise taxes without a vote in Congress."
White House trade adviser Peter Navarro downplayed the inflationary impact of the tariffs, calling it "second-order small." He emphasized that Trump’s goal is to strengthen the U.S. economy by increasing wages and factory jobs.
In addition to the tariffs on Canada and Mexico, Trump has launched a national security investigation into lumber and wood product imports, which could lead to steep tariffs. Canada, already facing 14.5% tariffs on softwood lumber, would be particularly affected. Trump has also ordered a revival of tariff probes on countries with digital services taxes, proposed fees for Chinese-built ships entering U.S. ports, and initiated an investigation into copper imports.
Desmond Lachman, a senior fellow at the American Enterprise Institute, warned that Trump’s aggressive tariff agenda could keep inflation high and potentially push the global economy into recession.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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