U.S. President Donald Trump’s 25% tariffs on Canadian and Mexican imports took effect Tuesday, igniting fears of a North American trade war and broader global economic instability.

Trump defended the tariff hikes, citing fentanyl trafficking, illegal immigration, and trade imbalances as primary reasons. However, analysts warn that the move could fuel inflation, supply chain disruptions, and market volatility. Following the announcement, the S&P 500 dropped 2%, reflecting investor concerns.

Canada, Mexico, and China retaliate

Canada swiftly responded with 25% tariffs on C$155 billion worth of U.S. goods, with C$30 billion in immediate effect. Mexican President Claudia Sheinbaum confirmed that Mexico is preparing countermeasures against U.S. imports.

China also escalated trade tensions, imposing 15% tariffs on U.S. chicken, wheat, corn, and cotton, along with 10% tariffs on soybeans, pork, beef, and dairy, effective March 10. Beijing strongly opposed the U.S. tariffs and warned of further retaliatory actions.

Global markets brace for economic fallout

With trade tensions soaring, global markets are bracing for volatility, rising consumer prices, and economic slowdowns. Trump has vowed further reciprocal tariffs to counter foreign levies, heightening concerns over prolonged trade conflicts.