US President Donald Trump's new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%, sparking trade wars that could slam economic growth and lift prices for Americans still smarting from years of high inflation.
The tariff actions, which look set to upend nearly $2.2 trillion in annual US trade with its top three trading partners, went live at 12:01 am (0501 GMT). Trump declared that all three countries had failed to do enough to stem the flow of the deadly fentanyl opioid and its precursor chemicals into the US.
Trump's action sparked a global stock selloff, with all major US indexes lower and the Nasdaq falling into correction territory after European shares logged their biggest one-day loss in six months. Automakers, homebuilders, retailers and other tariff-sensitive stocks all took hits.
This helped push the yield on the safe-haven 10-year US Treasury note to its lowest level since October. The dollar weakened against the Japanese yen and the Swiss franc, but the Mexican peso and Canadian dollar both weakened against the greenback.
China responded immediately, announcing additional tariffs of 10%-15% on certain US imports from March 10 and a series of new export restrictions for designated US entities. Later it said it had raised complaints about the new measures with the World Trade Organization.
Beyond the actions he announced on Tuesday, Trudeau said Canada would impose tariffs on another C$125 billion of US goods if Trump's tariffs were still in place in 21 days, likely to include motor vehicles, steel, aircraft, beef and pork. Canada also will challenge the US tariffs under rules of the WTO and the US-Mexico-Canada free trade agreement.
"They've chosen to launch a trade war that will, first and foremost, harm American families," Trudeau said of the Trump administration. "This is a very dumb thing to do."
The tariffs were already sparking some US price increases, running counter to Trump's election vow to bring down living costs for Americans.
Target CEO Brian Cornell told CNBC that the retail giant would increase prices "over the next couple of days" on some seasonal grocery products such as avocados from Mexico. "If there's a 25% tariff, those prices will go up...certainly over the next week," Cornell said.
Electronics retailer Best Buy also warned of potential higher prices as the tariffs came into effect. Best Buy CEO Corie Barry told analysts on a call that China remains the top source of products sold by the company, with Mexico in second place.
The 20% tariff on Chinese imports will apply to several key Chinese electronics categories untouched by prior duties, including smart phones, laptops, video game consoles, smart watches and speakers and Bluetooth devices.
Barry said the price increases could play out over a longer period, as Best Buy typically carries about six weeks' worth of inventory.
"We estimate the tariffs could lead to a nearly $1,000 per household increase annually in the cost of goods," said Nationwide Mutual chief economist Kathy Bostjancic. "The strengthening dollar helps mitigate some of the inflation impact, which would otherwise be greater."
The extra 10% duty on Chinese goods adds to a 10% tariff imposed by Trump on February 4 to punish Beijing over the U.S. fentanyl overdose crisis and comes on top of tariffs of up to 25% imposed on Chinese imports during Trump's first term.
Some of these products saw US tariffs increase sharply under former president Joe Biden last year, including a doubling of duties on Chinese semiconductors to 50% and a quadrupling of tariffs on Chinese electric vehicles to over 100%.
China's retaliatory tariffs announced on Tuesday targeted a wide range of US agricultural products including certain meats, grains, cotton, fruit, vegetables and dairy products.
Beijing also placed 25 US firms under export and investment restrictions on national security grounds. Ten of these firms were targeted for selling arms to Taiwan.
US farmers were hard hit by Trump's first-term trade wars, which cost them about $27 billion in lost export sales and conceded their share of the Chinese market to Brazil.
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