China and Canada retaliate as Trump’s new tariffs escalate trade tensions

China and Canada announced retaliatory measures on Tuesday after US President Donald Trump imposed sweeping new tariffs on imports from China, Canada, and Mexico, escalating fears of a broader trade war.

The US tariffs, which took effect at midnight, include 25% levies on goods from Canada and Mexico, and 20% tariffs on imports from China, doubling the rate imposed last month.

The duties impact over $918 billion worth of imports from America’s two largest trading partners.

China hits back with new tariffs, export restrictions

China responded swiftly, imposing 10%-15% additional tariffs on a range of US agricultural and food products and placing 25 American firms under export and investment restrictions on national security grounds. Among these, 10 companies were targeted for selling arms to Taiwan, which China claims as its own territory.

The new US tariffs—an extra 10% duty on Chinese goods—took effect at 0501 GMT on March 4, bringing the total tariff rate on affected goods to 20%.

The White House has justified the move as a response to China’s alleged role in supplying chemicals used in fentanyl production, a charge Beijing has repeatedly denied, calling it “fentanyl blackmail.”

China’s finance ministry announced that starting March 10, Beijing will impose an additional 15% tariff on U.S. chicken, wheat, corn, and cotton, alongside a 10% duty on US soybeans, sorghum, pork, beef, aquatic products, fruits, vegetables, and dairy.

In a statement, China’s commerce ministry condemned the US tariffs, calling them a serious violation of World Trade Organization (WTO) rules.

"The US's unilateral tariff measures seriously violate WTO rules and undermine the basis for economic and trade cooperation between China and the US," the statement read. "China will firmly safeguard its legitimate rights and interests."

Canada and Mexico prepare retaliation

Canada also announced immediate 25% tariffs on C$30 billion ($20.7 billion) worth of US goods, including beer, wine, bourbon, home appliances, and Florida orange juice.

Canadian Prime Minister Justin Trudeau warned that if Trump’s tariffs remained in place for 21 days, Ottawa would expand its countermeasures to an additional C$125 billion ($86.2 billion) of US imports.

"Tariffs will disrupt an incredibly successful trading relationship," Trudeau said, adding that the measures violate the United States-Mexico-Canada Agreement (USMCA), which Trump signed during his first term.

Meanwhile, Mexican President Claudia Sheinbaum was expected to announce her government’s response later Tuesday, according to the country’s economy ministry.

Markets and businesses react to trade war fears

The escalating trade conflict sent financial markets tumbling. Asian stock markets opened sharply lower, with Japan’s Nikkei index down more than 2% and Hong Kong’s Hang Seng index dropping 1.5%.

Businesses in the United States and abroad have warned of widespread disruption if Trump continues his aggressive tariff strategy.

US consumers and economy brace for impact

Since taking office, Trump has focused on increasing tariffs on China, Canada, and Mexico, arguing that these measures will curb illegal drug flows into the US and secure economic concessions from trading partners.

However, economists warn that the new tariffs could have serious economic consequences for American consumers. The Peterson Institute for International Economics estimates that a 25% tariff on Canada and Mexico and a 10% tariff on China would amount to the largest tax increase in at least a generation, costing the typical US household over $1,200 per year.

While Trump has pledged to lower prices for US consumers, economists argue that tariffs could instead drive costs higher across key industries, including technology, manufacturing, and agriculture.

The 20% tariff imposed on China includes several major US consumer electronics imports, such as smartphones, laptops, video game consoles, smartwatches, and Bluetooth devices, which had previously been left untouched.

Trump has vowed to introduce additional "reciprocal" tariffs on countries that impose their own levies on US goods, stating that these could take effect as early as next month.