Global financial markets experienced a sharp decline on Monday following US President Donald Trump’s announcement of a 25% tariff on goods imported from Canada and Mexico, effective Tuesday. The decision has raised fears of a renewed trade war in North America, leading to a significant sell-off in US stocks.
The Dow Jones Industrial Average dropped 649.67 points (1.48%), the S&P 500 fell 104.78 points (1.76%), and the Nasdaq Composite declined by 497.09 points (2.64%). The announcement also weakened the Mexican peso and the Canadian dollar.
“They will have to pay a tariff,” Trump stated at the White House. “The alternative is to build their factories and other industries in the US, where no tariffs will apply.”
The new tariffs, set to be enforced at 12:01 am EST on Tuesday, will cover a wide range of imports, including a 10% duty on Canadian energy products. Trump defended the measure, citing the failure of negotiations aimed at curbing fentanyl trafficking into the US.
Market Reactions and Industry Concerns
Business leaders and economists have expressed alarm over the tariffs, which will affect over $900 billion in annual imports. Experts warn that the move could disrupt the closely integrated North American supply chain.
The automotive sector has been particularly impacted, with General Motors’ shares dropping 4% and Ford’s falling 1.7%. Analysts anticipate price increases on vehicles and other consumer goods.
“The auto industry will suffer significantly due to supply chain disruptions and rising vehicle costs, which could dampen demand,” said Gustavo Flores-Macias, a public policy professor at Cornell University.
Canada and Mexico Consider Retaliation
While Mexican officials have yet to issue a formal response, President Claudia Sheinbaum assured that the government has contingency plans.
“We have alternative strategies ready,” Sheinbaum stated in Mexico City, without elaborating. She also noted that Mexico has intensified efforts to combat drug trafficking and is reviewing measures related to Chinese imports.
Canadian Foreign Minister Mélanie Joly signaled Ottawa’s readiness for potential economic consequences. “There is a level of unpredictability and disorder coming from the Oval Office, and we will navigate it,” she said.
Additional Tariff Actions Expected
Trump also confirmed that starting April 2, reciprocal tariffs will be applied to countries that impose duties on US products. Furthermore, he announced an increase in tariffs on all Chinese imports to 20% from the current 10%, citing Beijing’s insufficient efforts to combat fentanyl smuggling.
“China has not done enough to address the illicit drug crisis,” Trump said. US Centers for Disease Control and Prevention data indicates that synthetic opioids, primarily fentanyl, caused 72,776 deaths in the country in 2023.
In recent weeks, the administration has intensified trade measures, launching new investigations into digital services taxes, lumber imports, and copper trade. Additionally, an inquiry into Chinese-built ship imports has been initiated, with proposed entry fees of up to $1.5 million per vessel.
Economic Concerns Intensify
Critics argue that escalating tariffs could have widespread economic repercussions. Desmond Lachman, a senior fellow at the American Enterprise Institute, warned that the policy might contribute to inflation and potentially trigger a global economic downturn.
“Trump’s aggressive tariff strategy risks worsening inflation and further straining global trade relations,” Lachman said.
Democratic lawmakers also criticized the move, with Representative Suzan DelBene arguing that imposing tariffs without congressional approval places undue financial strain on American households.
“No president should have the authority to raise taxes without a congressional vote,” DelBene asserted.
Despite the backlash, White House trade adviser Peter Navarro defended the decision, downplaying inflationary concerns.
“The president believes this is the right path to strengthening the US economy, increasing real wages, and bringing back manufacturing jobs,” Navarro said in a media interview.
