The United States, under the leadership of President Donald Trump, has introduced new tariffs set to take effect at 12:01 AM EST on March 4. These tariffs target imports from Canada, Mexico, and China, further escalating trade tensions between the nations. Canada and Mexico face a 25% tariff on their goods, while Chinese exports to the US will see a combined 20% tariff following an additional 10% increase.

In response, the affected countries are preparing countermeasures, with Canada and China taking swift action against what they deem "unfair" economic policies.

Canada has swiftly announced retaliatory tariffs on US goods worth C$30 billion ($20.75 billion). The first phase imposes a 25% tariff, effective immediately, on targeted US imports. Additionally, Canadian authorities are preparing to expand their countermeasures, planning to impose further tariffs totaling C$125 billion ($86.4 billion) in the coming weeks.

Prime Minister Justin Trudeau confirmed the move on Monday, while Foreign Minister Melanie Joly described the tariffs as an “existential threat” to Canada’s economy, cautioning that these measures could lead to significant job losses.

China has also retaliated by imposing new tariffs on US food and agricultural products shortly after the US tariffs took effect. The newly announced measures include a 15% tariff on US chicken, wheat, corn, and cotton, along with a 10% tariff on sorghum, soybeans, pork, beef, seafood, fruits, vegetables and dairy products. These tariffs will be enforced starting March 10.

The Chinese government has strongly condemned the US decision, with its foreign ministry branding the move as “unilateralism and trade protectionism.” The Chinese Embassy in Washington also criticised the tariffs, stating that they violate World Trade Organisation (WTO) regulations and urging the US to address its domestic economic issues rather than imposing trade barriers.

Unlike Canada and China, Mexico has yet to announce specific retaliatory measures. President Claudia Sheinbaum stated that her administration would wait until her scheduled morning briefing on Tuesday before making an official response. However, she assured that Mexico is prepared for potential escalation, saying, “We have a plan B, C, D.”

Mexico has previously avoided US tariffs by intensifying border security and increasing efforts to combat drug trafficking. Sheinbaum reaffirmed that Mexico remains unified and ready to act if necessary.

The announcement of US tariff hikes has sparked instability in financial markets, causing North American stocks to plummet on Monday. The Dow Jones Industrial Average fell by 649.67 points (1.48%) to 43,191.24, while the S&P 500 dropped 104.78 points (1.76%) to 5,849.72. The Nasdaq Composite suffered the most significant loss, plunging 497.09 points (2.64%) to 18,350.19.

The impact extended beyond stock markets, with the Mexican peso and Canadian dollar weakening amid investor concerns over economic repercussions. Chinese companies listed in the US also suffered, with electric vehicle maker Nio tumbling 8.6% and e-commerce giant JD.com losing nearly 4%.

Further complicating the trade dispute, the Trump administration has announced an increase in tariffs on Chinese fentanyl-related imports from 10% to 20% unless Beijing takes more decisive action against fentanyl trafficking.

According to the US Centre for Disease Control and Prevention (CDC), synthetic opioids, primarily fentanyl, were responsible for 72,776 deaths in the US in 2023. Washington has repeatedly accused China of facilitating the flow of illicit fentanyl into the US, a claim Beijing has consistently denied.

Chinese Foreign Ministry spokesperson Lin Jian criticised the US for using the fentanyl crisis as a political tool to pressure Beijing, warning that such actions could disrupt cooperation on drug control.

With Canada already implementing retaliatory tariffs, China enforcing countermeasures, and Mexico carefully considering its next steps, fears of an all-out trade war are escalating. Analysts caution that rising tariffs could lead to disrupted supply chains, increased inflation and slower economic growth. As tensions mount, the global economy faces uncertainty, with further trade policy shifts expected in the coming weeks.