The aggressive trade strategy of President Donald Trump took a dramatic turn on Tuesday as he imposed a new 25 percent tariff on imports from Mexico and Canada, igniting a trade war with two of the United States’ closest allies.
This bold move is likely to reverberate across the economy, potentially harming American consumers and triggering a chain reaction of retaliatory actions that could plunge the US economy into uncertainty.
US stock markets plummeted in response to the looming threat of retaliatory tariffs from Canada, Mexico, and China, all of which could destabilize key sectors of the American economy. Meanwhile, new duties were also slapped on Chinese imports, adding fuel to the growing fire of global trade tensions.
All major American equities performance barometers ended lower on Tuesday. The Dow Jones Industrial Average shaved off 1.6 percent of its value, the S&P 500 fell 1.2 percent while Nasdaq composite slipped 0.4 percent.
Canada was quick to retaliate, imposing a hefty 25 percent tariff on American goods. Outgoing Prime Minister Justin Trudeau, not one to hold back, lambasted Trump’s decision as “a very dumb thing to do.” The Canadian tariff affects a $20.7 billion worth of U.S. imports—everything from orange juice, peanut butter, and wine to beer, coffee, appliances, and motorcycles.
Trump’s dramatic trade action, which threatens to disrupt nearly $2.2 trillion in annual trade, was triggered by his assertion that the United States’ top three trading partners had failed to curb the flow of fentanyl and its precursor chemicals into the US. The President made it clear that this was only the beginning. Further tariffs will follow, including reciprocal tariffs and non-tariff actions aimed at correcting what he described as years of unfair trade imbalances.
In a speech to Congress, Trump made no secret of his intention to target additional countries, particularly India, South Korea, and those within the European Union. “They’ve used tariffs against us for decades, and now it’s our turn,” he declared, sounding every bit the self-styled champion of American interests.
Not to be outdone, China issued a defiant statement through its Foreign Ministry, declaring its readiness for a showdown. “If war is what the U.S. wants—be it a tariff war, a trade war, or any other kind of war—we’re ready to fight till the end,” the Ministry warned, signaling that Beijing was bracing for further escalation.
In Mexico, officials have vowed to respond with their own set of tariffs and countermeasures, though they have held back on announcing specific actions. The delay suggests Mexico is waiting for signs of de-escalation from Washington, with President Claudia Sheinbaum signaling she would hold off until she could speak with Trump directly this week.
With global markets on edge and diplomatic relations fraying, the stage is set for a high-stakes economic battle, with no end in sight to the turmoil unleashed by Trump’s bold tariff gambit.
