President Trump’s tariffs on Canada, Mexico and China prompted swift retaliation Tuesday, igniting a sudden trade war that economists warned could lead to an economic crisis if it drags on.
Mr. Trump followed through on his threat to slap 25% tariffs on goods imported from Canada and Mexico. The president also doubled to 20% an existing tariff on most imports from China.
The new tariffs spooked investors, thrusting the stock market into turmoil with a sell-off that started late Monday and continued throughout Tuesday, eliminating months of gains.
Commerce Secretary Howard Lutnick told Fox News that Canada and Mexico were eager to negotiate a deal to blunt the tariffs.
“The president is listening because, you know, he’s very, very fair and very reasonable. So I think he’s going to work something out with them,” Mr. Lutnick said. “And we are probably going to be announcing that tomorrow.”
Earlier Tuesday, Canada and China announced immediate retaliatory tariffs on U.S. goods. Mexican President Claudia Sheinbaum said she would announce reciprocal tariffs and penalties against the U.S. on Sunday.
Democrats and other critics said the tariffs would punish Americans struggling to afford groceries, gas and housing.
“I don’t think this is going to be seen very positively by the American people,” said Senate Minority Leader Charles E. Schumer, New York Democrat.
A top supporter of Democrats, the United Auto Workers, praised Mr. Trump.
“Tariffs are a powerful tool in the toolbox for undoing the injustice of anti-worker trade deals. We are glad to see an American president take aggressive action on ending the free trade disaster that has dropped like a bomb on the working class,” UAW officials said.
The Trump administration argued that the tariffs would equalize unfair trade practices, particularly with China, and would strengthen the economy by returning manufacturing and jobs to America.
Honda announced Monday that it would move a Civic Hybrid manufacturing plant from Mexico to Indiana. Taiwan Semiconductor Manufacturing Co. announced plans to invest at least $100 billion in five semiconductor chip factories in the U.S., mainly Arizona, to avoid the looming tariffs.
“Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers. We are going to rebalance the economy,” Treasury Secretary Scott Bessent said on Fox News.
Mr. Bessent said he thinks Chinese manufacturers “will eat the tariffs” rather than pass the cost along to consumers.
The tariffs on energy products have been reduced to 10%, but those prices are poised to rise more significantly.
Ontario Premier Doug Ford announced a retaliatory 25% surcharge on electricity that the province exports to Minnesota, New York and Michigan.
“We will not hesitate to shut off their power as well,” Mr. Ford said.
Canadian Prime Minister Justin Trudeau called the tariffs “unjustified.” In response, he announced reciprocal 25% tariffs on $155 billion in American goods, starting with $30 billion worth of goods immediately on bourbon, orange juice, appliances and more. The remaining tariffs would go into effect in 21 days.
Canada already imposes steep tariffs on many American exports, including chicken, beef, butter, cheese, barley and wheat.
Mr. Trump warned that tariffs would increase if Canada retaliated.
“Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!” Mr. Trump said on social media, referring to his plan to annex Canada as the 51st state.
During his presidential campaign, Mr. Trump frequently threatened to impose tariffs, but even some of his most ardent supporters doubted he would carry out the threat.
The president sees tariffs as a way to raise billions of dollars for tax cuts, including eliminating taxes on tipped wages and overtime pay and ending taxes on Social Security checks for retirees.
“Tariffs are easy, they are fast, they are efficient and they bring fairness,” Mr. Trump said.
He aims to end the trade imbalance with Canada, which amounted to $63.3 billion in 2024. Canadian economists say the bulk of that deficit comes from heavy U.S. imports of Canadian energy.
“This is a tool that he uses,” said House Majority Whip Tom Emmer, Minnesota Republican. “He’s fighting for the American people, and he’s going to make sure that we get treated fairly by the people who want to do business with us around the world. They can posture, they can puff their chest and do whatever they want. They want access to the greatest markets in the world, which are right here in the USA.”
The president initially said the tariffs were a response to the continued problem of deadly fentanyl pouring over the southern border from Mexico and, to a lesser extent, across the northern border from Canada. More than 70,000 people in the U.S. died from fentanyl poisoning last year. The opioid drug is produced mostly in Mexico with ingredients from China.
“We need to see real engagement on the fentanyl issue, on the drug issue,” Vice President J.D. Vance said Tuesday. “Fundamentally, the underlying element of these tariffs is we think that the Canadians have not been serious about stopping the drug trade.”
Canada and Mexico announced initiatives and spending to crack down on drug smuggling, which led Mr. Trump to pause the tariffs for a month.
Mr. Trudeau said less than 1% of fentanyl that crosses into the U.S. comes from Canada and that fentanyl seizures on the Canadian border have declined 97% to nearly zero in January.
Mr. Trudeau said Mr. Trump is using fentanyl as an excuse for the tariffs.
“Canadians are reasonable, and we are polite, but we will not back down from a fight,” he said.
Mr. Trump said additional tariffs are coming.
New tariffs on steel and aluminum will begin this month. The president plans tariffs on some European Union imports, including agricultural products, beginning in April.
Mr. Trump is also considering a 25% tariff on cars and trucks imported from Europe, much to the satisfaction of U.S. autoworkers.
“We look forward to working with the White House to shape the auto tariffs in April to benefit the working class,” UAW officials said. “We want to see serious action that will incentivize companies to change their behavior, reinvest in America, and stop cheating the American worker, the American consumer, and the American taxpayer.”
• Alex Miller contributed to this report.
