Global financial markets experienced a steep decline on Monday after US President Donald Trump announced that his administration would implement 25% tariffs on imports from Canada and Mexico, effective Tuesday. This decision, which has reignited fears of a North American trade war, caused US stocks to tumble— the Dow Jones fell by 649.67 points (1.48%), the S&P 500 dropped by 104.78 points (1.76%), and the Nasdaq Composite plunged by 497.09 points (2.64%). In addition, both the Mexican peso and the Canadian dollar depreciated following the announcement.
Trump, speaking from the White House, stated, “They’re going to have to have a tariff. So, what they have to do is build their car plants, frankly, and other things in the US, in which case they have no tariffs.” The tariffs, which will be enforced starting at 12:01 am EST on Tuesday, will broadly apply to goods from Canada and Mexico, including a 10% duty on Canadian energy products. Trump defended his move by arguing that previous negotiations to curb the flow of fentanyl into the US had failed.
The tariff announcement has sparked widespread concern among business leaders and economists. They warn that these measures, which affect over $900 billion in annual imports, could disrupt the highly interconnected North American economy. The automotive industry has been hit particularly hard, with shares of General Motors dropping by 4% and those of Ford declining by 1.7%. Experts predict that these tariffs could soon lead to increased prices for vehicles and other imported goods.
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Gustavo Flores-Macias, a public policy professor at Cornell University, noted that the automobile sector is likely to suffer significantly—not only due to disruptions in supply chains spanning the three countries but also because higher vehicle prices could dampen consumer demand.
In response to the move, Mexican officials have yet to issue a formal response, though President Claudia Sheinbaum mentioned in Mexico City that her government is prepared with multiple contingency plans. Meanwhile, Canadian Foreign Minister Mélanie Joly said Ottawa was bracing for the repercussions, describing the situation as one characterized by “unpredictability and chaos” emanating from the Oval Office.
Trump also reaffirmed plans to impose reciprocal tariffs on countries that levy duties on US products, with these measures set to take effect on April 2. Additionally, he announced an increase in tariffs on all Chinese imports to 20%—up from 10%—citing Beijing’s insufficient efforts to control fentanyl shipments. He pointed out that synthetic opioids, primarily fentanyl, claimed 72,776 lives in the US in 2023, according to the CDC.
Over the past month, Trump’s tariff agenda has intensified, with new investigations into digital services taxes, lumber imports, and copper trade. A fresh probe has also been launched into imports of Chinese-built ships, with potential fees reaching up to $1.5 million per vessel entry.
Critics warn that such aggressive tariff policies could drive inflation higher and potentially push the global economy toward recession. Desmond Lachman, a senior fellow at the American Enterprise Institute, stated, “There’s no question that Trump’s ‘tariffs on steroids’ strategy risks exacerbating inflationary pressures while further straining international trade relations.” Democratic lawmakers, such as Representative Suzan DelBene, have also opposed the measures, arguing that no president should have the power to raise taxes without Congressional approval.
Despite these concerns, White House trade adviser Peter Navarro defended the decision, arguing that its inflationary impact would be minimal. “The president knows that to build a strong, prosperous America with rising real wages and more factory jobs, this is the path he’s chosen,” Navarro told CNBC.
Overall, Trump’s tariff announcement has sent shockwaves through global markets, setting the stage for further disruptions in the already fragile international trade environment.
