Trump's tariffs hit, U.S. stocks sink

U.S. President Donald Trump said Monday that 25 percent tariffs on Mexico and Canada will take effect on Tuesday, March 4.

"Very importantly, tomorrow, tariffs, 25 percent on Canada and 25 percent on Mexico, and that'll start," Trump told reporters at the White House.

"What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs," Trump said.

Trump also said that the reciprocal tariffs will start on April 2.

On February 1, Trump signed an executive order to impose a 25-percent tariff on goods imported from Mexico and Canada, with a 10 percent tariff increase specifically for Canadian energy products.

On February 3, Trump announced that the additional tariffs on goods from Mexico and Canada would be deferred until March 4, allowing more time for negotiations.

Ready to hit back

Canadian Foreign Affairs Minister Melanie Joly said Monday that Canada is prepared to retaliate against Trump's tariffs immediately, local media reported.

Joly said if the levies go into force, Ottawa will reinstate its previously announced plan for 25 percent retaliatory tariffs on 155 billion Canadian dollars (around $107 billion) worth of American goods.

"We know this is an existential threat to us. There are thousands of jobs in Canada at stake. Now, we've done the work, we are ready, should the U.S. decide to launch their trade war," Joly said.

Canadian officials made a month-long diplomatic push to avoid tariffs. Joly said Canada has responded to Trump's concerns about the border. Canada appointed a new "fentanyl czar" and designated Mexican cartels as terrorist groups but is still waiting to see what happens next.

Joly said she will meet with Prime Minister Justin Trudeau when he returns from London.

Natural Resources Minister Jonathan Wilkinson said Monday that Canada and the United States are no longer the trade partners they once were, even if the tariffs are removed.

"I don't think we are going back there even if the tariffs are removed," said Wilkinson.

U.S. stocks dive on tariff woes

U.S. stocks fell sharply on Monday after Trump reaffirmed that 25 percent tariffs on imports from Canada and Mexico would take effect as planned.

The Dow Jones Industrial Average fell by 649.67 points, or 1.48 percent, to 43,191.24. The S&P 500 sank 104.78 points, or 1.76 percent, to 5,849.72. The Nasdaq Composite Index shed 497.09 points, or 2.64 percent, to 18,350.19.

All three indices fell more than 2 percent at one point in the afternoon session.

"Whether the stock market can survive this change remains to be seen," Chris Rupkey, chief economist at FWDBONDS, said in a note. "One way or another, tariffs will be a shock for the economy."

Meanwhile, concerns over economic growth deepened. The Atlanta Fed's GDPNow model on Monday projected that the U.S. economy would contract at an annualized rate of 2.8 percent in the first quarter, a sharp decline from its previous estimate of a 1.5-percent contraction just days earlier.

Canadian investment research firm BCA Research downgraded its recommendation for U.S. equities to underweight from neutral on Monday. "In our view, the biggest mispricing in markets now is the ebullient growth expectations embedded in U.S. asset prices. As these expectations are not met, U.S. equities will underperform even amid a broader risk asset decline," the firm said in a note to clients.

(With input from Xinhua)