President Donald Trump’s new tariffs on imports from Mexico and Canada took effect on Tuesday, escalating trade tensions that could impact economic growth and increase consumer prices in the United States. The tariffs impose a 25% duty on imports from the two neighboring countries, while duties on Chinese goods have been doubled to 20%.

The measures, affecting nearly $2.2 trillion in annual trade, were implemented as Trump cited inadequate efforts by the three countries to curb the flow of fentanyl and its precursor chemicals into the U.S. However, Commerce Secretary Howard Lutnick indicated that Trump may negotiate a partial resolution with Canada and Mexico, with a potential announcement expected on Wednesday.

In response, Canadian Prime Minister Justin Trudeau condemned the tariffs as "a very dumb thing to do" and announced 25% tariffs on C$30 billion ($20.7 billion) worth of U.S. imports, including orange juice, peanut butter, beer, coffee, and motorcycles. Trudeau further warned that if the tariffs remain in place for 21 days, Canada will impose further tariffs on C$125 billion worth of U.S. goods, potentially affecting automobiles, steel, aircraft, beef, and pork.

Mexican President Claudia Sheinbaum also vowed retaliation but withheld details, stating that Mexico’s response would be announced on Sunday.

Meanwhile, China immediately responded with additional tariffs of 10%-15% on certain U.S. imports starting March 10 and imposed new export restrictions on select U.S. entities. Beijing also lodged a complaint with the World Trade Organization (WTO).

The tariff announcement led to a global stock sell-off, with major U.S. indexes closing lower. The Nasdaq fell into correction territory, while shares of automakers, homebuilders, and retailers faced significant declines. The Canadian dollar and the Mexican peso initially dropped but recovered slightly following Lutnick’s comments about a possible resolution.

Trump is expected to address the tariff policy, the fentanyl crisis, and a Ukraine minerals deal during a televised speech to Congress on Tuesday night.

Retailers and manufacturers are already warning of higher prices due to the new tariffs. Target CEO Brian Cornell stated that the company will increase prices "over the next couple of days" on seasonal grocery products such as avocados from Mexico. Best Buy CEO Corie Barry also indicated that consumer electronics sourced from China and Mexico would likely see price increases, affecting smartphones, laptops, and other devices.

Economists estimate that the tariffs could raise household expenses by nearly $1,000 annually. Nationwide Mutual’s chief economist Kathy Bostjancic noted that while a strengthening dollar may offset some inflationary pressures, the impact would still be significant.

Trump’s 20% tariff on Chinese imports comes in addition to a previous 10% duty imposed in February over fentanyl concerns. These add to the tariffs of up to 25% that were imposed during his first term. The Biden administration had previously increased duties on Chinese semiconductors to 50% and quadrupled tariffs on Chinese electric vehicles to over 100%.

China’s new tariffs target U.S. agricultural products, including meats, grains, cotton, fruit, vegetables, and dairy. Additionally, Beijing placed 25 U.S. firms under investment and export restrictions, citing national security concerns.

Trudeau strongly criticized Trump’s fentanyl claims as "completely bogus" and argued that Canada had already taken significant measures to curb fentanyl trafficking. The Canadian Prime Minister suggested that Trump's real goal was to weaken Canada’s economy, making it more vulnerable to U.S. influence.

Ontario Premier Doug Ford retaliated by canceling a C$100 million contract with Elon Musk’s Starlink network and banning U.S. firms from provincial government contracts. He also warned of a potential 25% surcharge on electricity exports to the U.S. if the tariffs persist.

Trudeau dismissed Trump’s suggestion of reopening negotiations on the U.S.-Mexico-Canada trade agreement before its scheduled review in 2026. He cautioned that Canada is prepared for economic hardship but will not yield to U.S. pressure.

As tensions rise, Canadian citizens have begun boycotting American products and booing U.S. teams at hockey games. The provincial governments of Ontario and Quebec have announced plans to remove U.S. alcohol from liquor store shelves.

"We’re not booing your teams, we’re not booing your players. We’re booing a policy that is designed to hurt us. And we’re insulted and we’re angry," Trudeau said, emphasizing Canada’s determination to fight back.

Trump has threatened to escalate tariffs further if Canada and Mexico retaliate, indicating that additional "reciprocal tariffs" could be imposed as early as April 2.

Economic experts warn that the new tariffs could trigger recessions in both the U.S. and Canada. The Federal Reserve Bank of Atlanta’s GDPNow model has already revised U.S. economic projections downward, now predicting a 2.8% contraction in the first quarter.

"Today's reckless decision by the U.S. administration is forcing Canada and the U.S. toward recessions, job losses, and economic disaster," said Candace Laing, CEO of the Canadian Chamber of Commerce.

Despite concerns from businesses and economists, Trump remains firm on his trade policy. Agriculture Secretary Brooke Rollins reassured U.S. farmers that they would ultimately benefit from the tariffs, stating, "His message, frankly, to the ag community is 'trust me.'"

As tensions mount, all eyes remain on the potential resolution that Trump may announce in the coming days, while businesses and consumers brace for economic fallout.