Live Updates: Markets Fall After New Trump Tariffs Prompt Retaliation

The Trump administration’s new tariffs — 10 percent on imports from China and 25 percent on most imports from Canada and Mexico — may encourage some companies to set up factories in the United States, but they could also strain supply chains, add costs for American consumers and manufacturers, and test diplomatic ties.

China and Canada imposed tariffs on U.S. goods, while President Claudia Sheinbaum of Mexico said Tuesday that her country would announce its countermeasures, including retaliatory tariffs, on Sunday.

China’s finance ministry announced 15 percent tariffs on imports of chicken, wheat, corn and cotton from the United States, as well as 10 percent tariffs on imports of sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products.

Canada imposed 25 percent tariffs on $30 billion worth of goods at 12:01 a.m. Eastern but did not specify which products would be affected. Prime Minister Justin Trudeau of Canada said in a statement that the tariffs would extend to $125 billion of American goods in 21 days.

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Stock markets: European stock markets also fell on Tuesday. The Euro Stoxx 50, which represents the biggest publicly listed companies in the eurozone, Britain’s FTSE 100 and the DAX index in Germany, were all down. Shares in European carmakers that have big manufacturing operations in Mexico to supply the U.S. market, including Volkswagen and Stellantis, which owns Chrysler and Jeep, fell, too.

Mexico responds: Ms. Sheinbaum said on Tuesday that her government rejected the Trump administration’s assertions that Mexico’s government had failed to crack down on cartels that export drugs including fentanyl to the United States, calling it “offensive, defamatory and without substance.” Mr. Trump has characterized the latest tariffs as a response to what he deems a lack of action on such issues.

China’s reaction: China’s retaliation includes levies on U.S. food imports and halting the sale of Chinese goods to 15 American companies. China is the top overseas market for American farmers, wielding considerable influence over prices and demand in the commodities markets of the Midwest.

Canadian damage: Tariffs are likely to damage Canada’s economy, which is dependent on exports and tightly integrated with the American market. Its prime minister, Justin Trudeau, is expected to address his country’s response in a news conference on Tuesday morning.

Tariff basics: Trade wars were a feature of Mr. Trump’s first term. But his latest tariffs could broaden the scale of disruption. Canada, Mexico and China account for more than a third of the products brought into the United States.

Sheinbaum’s statement ends on a note that she hits often: counseling calm and keeping a cool head, and reiterating that Mexico will resist subordination and will defend its sovereignty.

She was speaking on a panel Tuesday in Barcelona at one of the world’s biggest tech trade shows, which runs this week. The annual event, known as Mobile World Congress, attracts more than 100,000 people for product pitches, fund-raising appeals and debates about the future of technology.

The fresh U.S. tariffs on Canada, China and Mexico — the three largest U.S. trading partners and crucial cogs in many supply chains — were a common topic of conversation around the sprawling expo center. European companies are heavily represented at the event, and some executives tried to frame the rising trade tensions as an opportunity for Europe, whose sizable population and economy has often been held back by slow growth and a lack of competitiveness.

The recent mobilization of European leaders to step up military support of Ukraine was cited as an example of deeper European integration that in the past has tended to fizzle out. But the suspension of U.S. aid and the urgency of Ukraine’s plight — Prime Minister Keir Starmer of Britain recently described it as “a crossroads in history” — could spur greater continental cooperation, executives said.

Investors have piled into stocks of European defense companies that stand to benefit from stepped-up military spending. And European markets, in general, have outperformed U.S. stocks in recent weeks, even after slipping on Tuesday after the U.S. tariffs went into effect and some targeted countries retaliated.

Some of the tech execs in Barcelona say this is not a coincidence: Companies with Europe-focused operations and supply chains may be seen by global investors as a sort of geopolitical hedge against the tariffs and trade tensions arising from the United States. Take, for example, the stock market index tracking European telecoms, long seen as a somewhat sleepy backwater, which is up about 12 percent this year alone.

But this thesis will be tested soon, when President Trump plans to widen the scope of tariffs to cover all U.S. imports of steel, aluminum, copper and cars, as well as “reciprocal” tariffs against countries to address what he calls “unfair” relationships and to compel companies to move manufacturing to the United States.

Target was already under pressure, in part because of a different shift in policy by the Trump administration against divsersity, equity and inlcusion policies. The State Board of Administration of Florida, the agency that oversees the state’s public employee retirement funds, sued the company last month for allegedly deceiving shareholders about the risk of its 2023 Pride Month campaign. Some shoppers reacted angrily to the campaign, which included L.G.B.T.Q.-themed apparel for children.

The drop in yields, however, also signaled mounting concerns about the ability of the economy to withstand incoming tariffs for too long. That concern was also evident in a shift in expectations for the number of times the Federal Reserve will cut interest rates. Investors now expect the central bank to cut rates as many as three times this year, a sudden change that reflects worries that the Fed will be pushed into lowering rates quickly to prop up an ailing economy.

“While a trade war might have short-term reflationary implications,” said Ian Lyngen, an interest rate strategist at BMO Capital Market, “it also carries with it significant risks to global growth.”

European stocks had earlier slumped as investors weighed the prospects of a global trade war after China and Canada quickly imposed tariffs of their own.

The Euro Stoxx 50 index, which comprises the eurozone’s largest companies, fell as much as 2.4 percent, its worst performance in about four months. Germany’s benchmark index, the DAX, dropped as much as 2.7 percent, erasing nearly all of its gains from the previous day when it hit a record on the promises for more European military spending.

Shares of German automakers and suppliers were hit especially hard as many have assembly plants in Mexico for vehicles they sell in the United States. Volkswagen shares fell about 4 percent, BMW’s shares dropped more than 5 percent. Daimler Truck, which owns Freightliner and Thomas Built Buses, slid more than 6 percent. Continental, a maker of auto parts that also produces in Mexico, fell 9 percent.

The U.S. dollar index, which measures the currency against a basket of other major currencies, was 0.5 percent lower. The Canadian dollar hit a one-month low against the dollar before recovering its losses.

But the Mexican peso remained weaker against the U.S. dollar, its fourth consecutive day of declines.

Oil prices also fell after the Opec oil cartel and some of its allies said on Monday that they would increase production. Brent crude, the international benchmark, dropped 1.6 percent to $70.47 a barrel.

Amid a heavy morning of losses, some European defense companies held on to gains as the European Commission proposed additional military spending, including a measure that would provide 150 billion euros ($158 billion) in loans to E.U. countries for defense investment. Shares in the German arms manufacturer Rheinmetall rose 1 percent, extending a 14 percent gain from the day before. Shares of BAE Systems, a British defense contractor, rose 1 percent after climbing 15 percent on Monday.

In its announcement about halting imports of American logs, China’s customs agency said that bark beetles and longhorn beetles had been found in some of the shipments. China imported almost $3 billion of American wood last year, nearly 2 percent of overall Chinese imports from the United States. The customs agency also revoked the right of three international commodities firms to ship American soybeans to China.

Times had changed, she said: Mexico would not bow down to foreign governments.

Given the circumstances — President Trump’s steep tariffs against Mexico went into effect in the first minutes of Tuesday — Ms. Sheinbaum’s optics were fitting. As Mr. Trump once again targeted Mexico, using the hammer of tariffs as a negotiating tool, a sense of Mexican nationalism has been strengthened.

The Mexican government and businesses have rekindled a “Made in Mexico” campaign. Some Mexicans have called for boycotts of U.S. companies and products, while others have put together lists of Mexican stores and brands to support instead of American ones.

Ms. Sheinbaum is frequently featured on the front page of local newspapers with members of the country’s military or in front of a giant Mexican flag. Private companies have taken out nationalistic advertisements, one featuring the president leading the masses and carrying a banner saying, “Mexico united, never defeated!”

And Ms. Sheinbaum, who has been trying to balance a pro-Mexico drumbeat while advocating cooperative dialogue with American officials, has seen her approval ratings rise as high as 80 percent, according to one poll. She has not only succeeded a popular president, Andres Manuel López Obrador, who reshaped Mexican politics and was her mentor, but has come into her own at a time of global upheaval under Mr. Trump.

“There’s a lot of support for the president now,” said Juan Manuel Sánchez, 57, an artisan in Mexico City who also praised Ms. Sheinbaum’s crackdown on drug trafficking.

During his first term, Mr. Trump used tariffs to renegotiate the North American Free Trade Agreement and strike a new U.S.-Mexico-Canada agreement, which he signed in 2020. He has used similar tactics now against Mexico and Canada, while arguing that too many illegal drugs and migrants are flowing from the two countries into the United States.

A month ago, Mr. Trump signed an executive order calling for 25 percent tariffs on Mexican imports. But less than a day before they were to go into effect, Mr. Trump and Ms. Sheinbaum spoke on the phone and announced an agreement to delay them for 30 days.

Under the terms of that deal, Mexico posted an additional 10,000 Mexican National Guard troops on the border to help stem the flow of fentanyl and migrants into the United States. In return, Ms. Sheinbaum said, the U.S. government would work to stop the flow of guns into Mexico.

Even though the number of migrant crossings at the southern border has dropped to once unthinkable levels since Mr. Trump took office in January, Mexican officials were significantly deterring migration to the United States months before. Last week, Mexico sent nearly 30 top cartel operatives wanted by American authorities to the United States, one of the largest such handovers in the history of the drug war.

“There’s a lot of unity in the country in the face of what is happening,” including Mr. Trump’s economic threats, Ms. Sheinbaum said on Monday, hours before the tariffs took effect.

Although Mr. Trump insisted on Monday that the tariffs would begin the next day, the cloud over Mexico from the north has loomed since his most recent presidential campaign. It led to uncertainty and frustration but also boosted national pride.

Agustin Barrios Gómez, a former Mexican congressman and a founding member of the nonprofit Mexican Council on Foreign Relations, said that even Mexicans who didn’t vote for Ms. Sheinbaum “understand that right now, Mexico’s national interest — beyond party politics — is to rally around our president.”

One reason for the surge in support for her, Mr. Barrios Gómez said, was to ensure Ms. Sheinbaum has enough political capital within the country to be in a stronger negotiating position with Mr. Trump come what may.

Nationalism is complicated in Mexico, Mr. Barrios Gómez said, because it is so intricately intertwined with the United States geographically, culturally and economically, as well as with immigration and security.

“We are not neighbors, we’re roommates,” he said. In other words, analysts said, the U.S. tariffs against Mexico will hurt both economies, as would the reciprocal tariffs suggested by Ms. Sheinbaum. (Mr. Trump is also threatening separate 25 percent tariffs on global steel and aluminum imports, which would affect Mexico.)

For Mexico, the tipping point against the United States has not been reached, Mr. Barrios Gómez said late last week before the tariffs went into effect, but “if you call someone your enemy enough, you might just turn them into one.”

The specter of a trade war between the countries has changed the perception in Mexico of Mr. Trump and of its relationship with the United States.

According to the Mexican polling firm Buendía & Marquéz, the number of respondents in Mexico who believed the relationship between Ms. Sheinbaum and Mr. Trump was at least good dropped significantly between last November and February, while the number of respondents who have a negative opinion of Mr. Trump jumped to 80 percent in mid-February from 66 percent in early January.

Mr. Trump has nevertheless praised Ms. Sheinbaum as a “marvelous woman” while mocking Canada’s prime minister, Justin Trudeau. Mr. Trudeau, who has become increasingly unpopular at home, is entering his final days in office while Ms. Sheinbaum’s popular foundation is stronger. She resoundingly won election last summer and began her six-year term in October.

During her Monday morning news conference, Ms. Sheinbaum once again called for calm ahead of Mr. Trump’s tariffs deadline and said she hoped to strike a last-minute deal, which did not materialize. “Obviously we don’t want there to be tariffs,” she said, adding that her government would respond.

Since before Mr. Trump’s inauguration, her administration has been promoting what it calls “Plan Mexico,” a strategy meant to diversify its economy to make it less dependent on the United States, to reinvigorate Mexican manufacturing and propel the country to become one of the world’s top 10 economies. (It is currently the 15th largest, according to the International Monetary Fund.)

As part of that effort, Ms. Sheinbaum’s administration started the “Made in Mexico” drive, in which an official seal is placed on products made in the country that meet certain requirements. The seal, with an illustration of a Mexican eagle, was created in 1978 to promote Mexican goods and has been revived by presidents over the years.

As the threatened U.S. tariffs were paused a month ago, Mexico’s secretary of economy, Marcelo Ebrard, told companies that the government wanted to once again push the “Made in Mexico” seal.

Last week, Walmart Mexico, the largest private employer in the country with 200,000 workers, unveiled its efforts to put the “Made in Mexico” seal — with the added word “proudly” — in the aisles of its 3,000 stores throughout the country. Although Walmart is an American brand, Javier Treviño, Walmart Mexico’s senior vice president of corporate affairs, said the company wanted to show customers that it is a Mexican entity and that most of the products it sells are made within the nation.

The campaign “is very important for us because we have to strengthen investment and confidence in Mexico and ensure that the economy can grow, because the environment is not easy,” Mr. Treviño, a former Mexican congressman, said in an interview.

Other big companies have joined Ms. Sheinbaum’s push, including Grupo Modelo, the brewing giant that makes Corona and Modelo beers, which announced it would put new “Made in Mexico” caps on bottles.

On Saturday, Mr. Sánchez, the Mexico City artisan, was at his neighborhood market, which, he said, proved that he prefers to shop locally. Before Mr. Trump’s tariffs went into effect, he said he might consider boycotting U.S. companies and products if they did.

Unlike in Canada, where locals have been shunning American products and buying more Canadian flags since Mr. Trump threatened the tariffs, Mr. Sánchez said that Mexicans were already nationalistic and that most had a flag.

“But when something very serious happens here,” he said, “we all unite.”

Maria Abi-Habib contributed reporting from Mexico City.

Beijing also said it took action against dozens of other companies from the United States as part of a volley of action against Washington in retaliation for another of tariffs.

Chinese officials singled out 15 companies, including the drone maker Skydio, for punitive trade measures to “safeguard national security and interests.” It also said it added another 10 American companies to what it calls an “unreliable entities list” preventing them from doing any business in China.

Both blacklists have increasingly become go-to tactics for Beijing in striking back at Washington in their escalating trade war. But in the past, Beijing has taken narrower action, targeting defense companies related to arms sales with Taiwan and companies with little to no presence in China.

This time Beijing went further and banned Illumina from doing business in China, accusing it of violating market transaction rules and discriminating against Chinese companies. Beijing put the company on a blacklist last month, together with PVH, the clothing maker behind Calvin Klein and Tommy Hilfiger.

Illumina said it was assessing Beijing’s action “to fully understand the impact on our operations in China,” but that it would continue to serve its customers in China.

“We respect and abide by Chinese laws and regulations, and we are committed to operating in compliance with the latest guidelines from the Ministry of Commerce,” an Illumina spokeswoman said in a statement.

Up until now, China has been reluctant to take retaliatory swipes that would affect American companies’ businesses for fear of spooking foreign investors. Even after targeting Illumina, Chinese officials sought to pre-empt concerns.

China targets only “a small number of foreign entities that endanger China’s national security in accordance with the law,” the commerce ministry said in a statement, adding that it “welcomes companies from all over the world to invest and start businesses in China.”

The action on companies was part of a broader response taken in the minutes after President Trump’s latest round of tariffs. The retaliation from Beijing included tariffs on food imported from the United States.

“For China, the ultimate scenario would be a total reduction in trade hostilities with the U.S.,” said Joe Mazur, an analyst at Trivium, a research firm. “That is not going to happen, and so the only thing they can do right now is make an example of a handful of companies.”

China and the United States appear to be headed for more trade collisions even as Chinese academics and former diplomats have traveled to Washington in recent weeks to try to initiate conversations for a deal.

Beijing may be more emboldened now to take further punitive action against American companies in China, Mr. Mazur said.

“In sending the message,” he said, “you are making other American companies wary of their position in China.”

Zixu Wang and Li You contributed research.

China has long denied American accusations that it supplies most of the ingredients used by fentanyl laboratories in Mexico and elsewhere and has contended that the United States should do more to discourage demand for the drug.

Lou Qinjian, a spokesman for China’s National People’s Congress, chastised the United States for violating the World Trade Organization’s free trade rules. “By imposing unilateral tariffs, the U.S. has violated W.T.O. rules and disrupted the security and stability of the global industrial and supply chains,” he said.

President Trump has contended his tariffs are essential to stopping the flow into the United States of fentanyl, a synthetic opioid that has caused hundreds of thousands of deaths through overdoses.

But the U.S. imposition of tariffs “will deal a heavy blow to counternarcotics dialogue and cooperation,” Lin Jian, a spokesman for China’s Ministry of Foreign Affairs, said at a news briefing.

Mr. Trump has now tagged almost all goods from China with an extra 20 percent in tariffs since taking office in January. He announced 10 percent tariffs on Feb. 4 and another round on Tuesday. Mr. Trump also moved ahead on 25 percent tariffs on Mexico and Canada on Tuesday, after a monthlong delay.

China had responded to the February tariffs by immediately announcing that it would start collecting, six days later, additional tariffs on liquefied natural gas, coal and farm machinery from the United States. But those tariffs combined hit only about a tenth of American exports to China, making them much narrower than Mr. Trump’s comprehensive tariffs.

China’s action on Tuesday was much broader. China is the top overseas market for American farmers, wielding considerable influence over prices and demand in the commodities markets of the Midwest.

By targeting imports of food, Beijing repeated its response to tariffs that Mr. Trump imposed during his first term. China put tariffs on American soybeans in 2018 and shifted much of its purchasing to Brazil.

But the strategy backfired then: Mr. Trump responded by placing more tariffs on Chinese goods. Because China sells much more to the United States than it buys, it quickly ran out of American goods to impose tariffs on. And American farmers had some success in finding other markets for their crops.

China’s tariffs in 2018 also had less of a political impact in the United States than Beijing’s leaders had hoped. In 2018 Senate elections in three of the top soybean-exporting states, voters gave little evidence they held the Chinese action against Mr. Trump or the Republican Party. All three states saw Democratic senators replaced with Republicans that year, as social issues proved more compelling for many voters than trade disputes.

Yet China has potential trade weapons that go beyond tariffs on food. In early February, Beijing implemented restrictions on exports to the United States of certain critical minerals, which are used in the production of some semiconductors and other technology products.

Blocking key materials from reaching the United States, a tactic known as supply chain warfare, carries considerable risks for China. Beijing is struggling to attract foreign investment. China’s leaders have also stated that attempting to bolster the country’s domestic economy, weighed down by the fallout of a devastating real estate slowdown, is a priority.

Beijing could make it even harder for American companies to do business in China, but that could also hurt foreign investment. In addition to effectively preventing 15 companies from buying Chinese goods, China’s Ministry of Commerce added another 10 American companies on Tuesday to what it calls an “unreliable entities list,” preventing them from doing any business in China.

Many of the companies that China penalized on Tuesday are military contractors. But the Ministry of Commerce also blocked imports from the biotech firm Illumina. It accused Illumina, which is based in San Diego, of violating market transaction rules and discriminating against Chinese companies.

Chinese market regulators said in early February, after Mr. Trump imposed tariffs, that they had launched an antimonopoly investigation into Google. Google has been blocked from China’s internet for more than a decade, but the move could disrupt the company’s dealings with Chinese companies.

Mr. Lou, the National People’s Congress spokesman, signaled his country’s emerging strategy in dealing with Mr. Trump’s tariffs by calling for closer trade relations with Europe.

“China and Europe can complement each other’s strengths and achieve mutual benefit in many areas of cooperation,” he said at a news conference ahead of the opening on Wednesday of the annual weeklong session of China’s legislature.

But Europe has its own trade disputes with China, notably over electric vehicles. European politicians and business leaders have voiced concern about how to cope with an expected further flood of exports this year from China, which has embarked on a far-reaching factory construction program.

China’s rapid rise since 2000 to global pre-eminence in manufacturing, with a third of the world’s output, has come to a considerable extent at the expense of the American share of global industrial production, according to United Nations data. European nations have been wary of closing factories and relying on low-cost imports from China.

Mr. Trump has moved much faster on China tariffs during his second term than he did in his first. In 2018 and 2019, he imposed tariffs of up to 25 percent, in stages, on imports worth about $300 billion a year. He then concluded a trade agreement with China in January 2020, leaving in place 25 percent tariffs on many industrial goods while cutting 15 percent tariffs on some consumer products to 7.5 percent and canceling a few other tariffs.

By contrast, Mr. Trump has now imposed 20 percent tariffs on all goods that the United States imports from China, worth about $440 billion a year. That includes some products, like smartphones, that he omitted during his first term.

Mr. Trump’s actions this year have raised average tariffs on the affected Chinese imports to 39 percent — compared with just 3 percent before he took office in 2017. Apart from China, Canada and Mexico, the United States imposes tariffs averaging about 3 percent on most trading partners.

China’s average tariffs on goods from most of the world are twice as high, and much higher on imports from the United States.

In Mr. Trump’s first term, the Chinese government reduced taxes that it charges the country’s exporters. That gave them room to cut prices and offset at least part of the tariffs for their customers, which include many small American businesses as well as big retailers like Wal-Mart, Amazon and Home Depot.

As another way around tariffs, some Chinese exporters shifted the final assembly of their products to countries like Vietnam, Thailand or Mexico, while keeping the production of core components in China. Mr. Trump is now trying to stop some of the trade through Mexico, which critics of Chinese exports see as a backdoor into the U.S. market.

Many Chinese exporters resorted to using the so-called de minimis exception to tariffs: dividing shipments into many packages, each with a value of less than $800. Each shipment is then exempt from tariffs and customs processing fees and mostly omitted from customs inspections and American imports data.

At least $1 of every $6 worth of American imports from China is now arriving through these de minimis shipments.

In early February, Mr. Trump issued an order briefly halting the de minimis tariff exemption for goods from China, Mexico and Canada. After packages quickly accumulated at American airports, he delayed the order for shipments from China until procedures could be developed to handle them, and postponed for a month his order for de minimis imports from Canada and Mexico. On Sunday, he again delayed action on those imports from Canada and Mexico.

Wu Xinbo, dean of the Institute of International Studies at Fudan University in Shanghai, said that by retaliating now, “China sends a strong signal to the Trump administration that a unilateral tariff doesn’t work — you have to sit down to talk to us and to negotiate with us.”

Alexandra Stevenson contributed reporting from Beijing and Chris Buckley and Amy Chang Chien contributed reporting from Taipei. Li You contributed research.

China also banned a biotech company called Illumina from doing business in the country, a signal that Beijing is widening its net to include companies not related to the military on its “unreliable entity list.” It accused Illumina, which is based in California, of violating market transaction rules and discriminating against Chinese companies.

But even as China was announcing its own penalties on American companies and goods, Lou held out the possibility of a negotiated climbdown from a trade war. “We hope the U.S. can work in the same direction as China and find a solution through equal-footed consultation,” he said.

The finance ministry imposed 15 percent tariffs on imports of chicken, wheat, corn and cotton from the United States and 10 percent tariffs on imports of “sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products.”

The tariffs will make good on President Trump’s campaign promise to rework America’s trade relations, and they are likely to encourage some manufacturers who want to sell to American customers to set up factories in the United States, instead of other countries.

But by altering the terms of trade between the United States and its largest economic partners, the tariffs will also probably rattle supply chains, strain some of the country’s most important diplomatic relationships and add significant costs for American consumers and manufacturers.

Canada, Mexico and China are the three largest trading partners of the United States, accounting for more than 40 percent of both U.S. imports and exports last year. The three countries supply the bulk of crude oil, beer, copper wire, toilet paper, hot-rolled iron, cucumbers and chocolate imported by the United States, as well as a dizzying array of other products.

The tariffs came as somewhat of a surprise, given that Mexico and Canada have gone to great lengths in recent weeks to convince the president that they were stepping up enforcement of their borders. The president initially threatened in November to impose the tariffs, saying that the three countries were not doing enough to halt the flow of drugs and migrants into the United States.

On Monday, however, Mr. Trump appeared to change his terms, saying that Canada and Mexico needed to relocate auto factories and other manufacturing to the United States.

“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,” he said.

Prime Minister Justin Trudeau of Canada said on Monday evening that his country would respond with its own tariffs of 25 percent on $155 billion of American goods. Tariffs on $30 billion would go into effect Tuesday, and the remainder in 21 days, he said.

Mr. Trudeau said that less than 1 percent of the fentanyl intercepted at the U.S. border came from Canada, but that the country had still worked to stop its flow, pushing fentanyl seizures to near zero by January.

“Canada will not let this unjustified decision go unanswered,” Mr. Trudeau said.

The Mexican government had also gone to great lengths to step up its border enforcement, including cracking down on the cartels producing fentanyl and handing over dozens of top cartel operatives to the United States. Mexico also pledged to deploy 10,000 National Guard troops to help deter migration, building on earlier efforts to disassemble migrant caravans well before they reach the border with the United States.

Activity at the border had already calmed by the time Mr. Trump took office in January, but in recent weeks border crossings have declined to the lowest in recent history. At one point in February, U.S. personnel on the Mexican border encountered only 200 migrants in a single day, levels that were once unthinkable.

In Canada, which is a minuscule source of fentanyl compared with Mexico, the threat of tariffs sparked frustration and outrage. It also led to a surge of patriotism and anti-American sentiment, which was intensified by Mr. Trump’s repeated calls for the annexation of Canada.

Shortly after Mr. Trump, as president-elect, first made the tariff threat in November, Mr. Trudeau flew to Florida to meet him at Mar-a-Lago, the president’s estate and private club. Canada began assembling a list of retaliatory tariffs and put together a plan to increase security at its border. That included appointing a “fentanyl czar,” leasing Black Hawk helicopters for Royal Canadian Mounted Police patrols and buying a fleet of drones.

Days before the tariffs were imposed, some business leaders who are members of a Canada-U.S. relations group that Mr. Trudeau set up after the tariff threat were already pessimistic that the lobbying, the alliance building and the border strengthening would bring another last-minute reprieve.

Steve MacKinnon, Canada’s employment minister, said on Monday that the government would move to introduce extra wage supports for workers who are left jobless because of the tariffs.

Economists have estimated that the tariffs will lower economic growth throughout North America, but that they will hit Canada and Mexico the hardest, given that those countries send roughly 80 percent of their exports to the United States.

In contrast, China sends only about 15 percent of its exports to the United States, so it is much less exposed to the tariffs. While Canada and Mexico worked hard to appease Mr. Trump, China did not make similar overtures. The Chinese government did not want to be seen as pleading and was wary of offering concessions before it understood the parameters of the negotiation, people familiar with their thinking said.

In a statement, a spokesperson for the Chinese Ministry of Commerce said China was “strongly dissatisfied” and would take countermeasures to “safeguard its own rights and interests.” The spokesperson accused the United States of disregarding facts and international trade rules, and described the episode as “bullying.”

The tariffs on Canada, Mexico and China come in addition to a raft of other tariff proposals Mr. Trump has made this year. The administration is set to introduce tariffs on foreign steel and aluminum on March 12, and has suggested that it will introduce a variety of others, including on foreign cars, in April. Mr. Trump has also opened trade investigations that could result in tariffs on copper and timber.

It remains to be seen whether business executives can persuade Mr. Trump to walk back any of these plans. Gustavo Flores-Macías, a professor of government and public policy at Cornell University, said the stock market had already erased the gains of a “Trump bump” since the president’s election.

Mr. Flores-Macías said the tariffs would harm industries, particularly the automotive sector. Just short of 40 percent of the cars and trucks sold in the United States are imported, according to JATO Dynamics, an automotive research firm, with Mexico the biggest supplier of imported cars.

“The U.S. economy is larger and can better absorb the negative consequences of a trade war, but a simultaneous trade war with its three main trade partners (once tariffs against China are included) will affect all parties negatively,” Mr. Flores-Macías wrote in an email.

The International Association of Machinists and Aerospace Workers, which represents workers in the aerospace, railroad, health care and automotive industries in the United States and Canada, strongly condemned what it called a “reckless decision” and “an unjustified attack on a trusted ally.”

“Canada is not the enemy,” said Brian Bryant, the group’s international president. “This decision will disrupt industries that rely on integrated supply chains, hurting workers on both sides of the border.”

“Tariffs are taxes on Americans and American business, not foreign governments or companies,” said Gary Shapiro, the chief executive of the Consumer Technology Association, a trade group for tech companies. “Adding tariffs on imports from Canada, Mexico and China will raise prices for Americans at a time when inflation and affordability is their top concern.”

Other executives say that they support the goal of fighting the fentanyl trade, but that tariffs will have other economic effects, like chilling hiring and weighing on consumers.

Casey Hite, the chief executive of Aeroflow Health, which provides breast pumps, CPAP machines, diabetic testing kits and diapers to people covered by insurance, said

that if tariffs erased the profit margins for certain medical devices, his company would probably not offer those models. That would mean patients would have fewer breast pumps or CPAP machines to choose from.

The company, whose headquarters are in Asheville, N.C., and which employs more than 1,000 people, may also pull back on hiring and other expansions, he said. As time goes on, Aeroflow will work to renegotiate its contracts with health insurers, which will probably pass on their costs to patients.

“In the short term, tariffs can limit access,” Mr. Hite said. “In the long term, folks will see that in the form of increased insurance rates.”

Jack Ewing contributed reporting.

The rebuke of President Trump’s tariff plans, a core part of his new administration’s economic policy, came just days before sweeping tariffs on Canada and Mexico were expected to go into effect. Mr. Trump said on Monday that tariffs that will add a 25 percent fee on all imports from Mexico and Canada, and an additional 10 percent for Chinese goods, would take effect on Tuesday.

Mr. Trump had delayed the tariffs on Canadian and Mexican imports for a month, and the apparent confirmation that they would be imposed this time sent stock prices reeling. The S&P 500 fell nearly 2 percent, its worst day of trading so far this year.

Berkshire Hathaway has recently built up a large investment in Treasury bills, government debt that’s a less risky alternative to corporate bonds and stocks. “You always have to ask that question in economics: And then what?” Mr. Buffett said in the interview. “Prices will be higher 10 years from now, 20 years from now, 30 years from now.”

He was also asked about his thoughts on Elon Musk’s involvement in Mr. Trump’s administration, but mostly deflected the question.

“I better not get into that,” he said with a laugh. “I’ve talked to Elon a few times.”

The afternoon slump in the markets followed Mr. Trump’s statement at the White House on Monday that he would move forward on Tuesday with broad 25 percent tariffs on Canada and Mexico, the United States’ two biggest trading partners. Mr. Trump has also said he would impose an additional 10 percent tariff on goods from China, on top of the 10 percent that took effect last month.

Investors fear that the tariffs will raise prices in the United States, pushing the Federal Reserve to keep interest rates elevated for longer and risking tipping the economy into a downturn.

Monday’s sell-off came after the stock market had already lost some of its shine in February. The S&P 500 ended about 1.4 percent lower for the month, as the Trump administration’s policy priorities and weak consumer sentiment made investors uneasy.

On Monday, the Russell 2000 index of smaller companies, which are typically more exposed to the ebb and flow of the economy, fell 3.1 percent, pushing further into its own correction; the index is down more than 14 percent since it peaked in late November. The Vix volatility index, also known as Wall Street’s “fear gauge,” rose sharply to 24 points, before easing to around 22, still above its long-term average.

Mr. Trump’s comments on tariffs extended the stock market’s declines from earlier in the day, when a February reading for a key manufacturing index came in weaker than investors had expected, a sign of slower growth in the sector.

And then there is the transactional view, that Mr. Trump sees the acquisition of Canada as the 51st state as the ultimate real estate deal that would seal his presidential legacy.

As Mr. Trump prepares to push ahead with a new round of tariffs on the United States’ neighbors to the north and south, he has expressed a special brand of loathing for Canada. The bullying of a country whose most prominent stereotype is that its people are “nice” has led to political upheaval in Canada and created both consternation and speculation about why Mr. Trump wants to engage in a trade war with one of America’s biggest trading partners.

“I can’t quite figure it out,” said Stephen Moore, the Heritage Foundation economist and former adviser to Mr. Trump. “Whether it’s some kind of strategic leverage, I don’t know.”

Noting that there is “no love lost” between the president and Mr. Trudeau, Mr. Moore added: “With Trump, politics is personal.”

Mr. Trump has threatened to hit Mexico and Canada with 25 percent tariffs on all imports on Tuesday unless the countries do more to prevent migrants and drugs from flowing into the United States. On Saturday, the president picked another trade fight with Canada, this time over lumber.

Intrigue abounds in Canada about why Mr. Trump has repeatedly belittled a neighbor and threatened to destabilize its economy with tariffs, a process that has brought relations between the two countries to a low point not seen in decades.

In contrast to the close and supportive relationship that Mr. Trudeau, who is entering his final week in office, enjoyed with another U.S. president, Barack Obama, his relationship with Mr. Trump has been fractious.

In 2018, following the Group of 7 summit meeting in Charlevoix, Quebec, Mr. Trump heckled Mr. Trudeau on social media, accusing him of being “very dishonest and weak” and of making up “false statements” while suggesting that he might impose tariffs on Canadian-made autos.

While Mr. Trudeau was generally circumspect in his public remarks about Mr. Trump during the president’s first administration, the two men have dramatically different personal and political styles. Mr. Trump bombastically denigrates people he perceives as opponents, whereas Mr. Trudeau often speaks about the value of bringing people together, what he once called a “sunny ways” approach to political life.

In candid remarks to a group of business leaders last month that was captured by a microphone, Mr. Trudeau offered a theory for Mr. Trump’s Canada obsession that is widely shared in the country.

“Not only does the Trump administration know how many critical minerals we have, but that may be even why they keep talking about absorbing us and making us the 51st state,” Mr. Trudeau told the gathering in Toronto.

“They’re very aware of our resources,” Mr. Trudeau said, “of what we have, and they very much want to be able to benefit from those.”

He added: “But Mr. Trump has it in mind that one of the easiest ways of doing that is absorbing our country. And it is a real thing.”

Mr. Trump does have a particular affinity for minerals. He has been pushing to broker a deal to secure access to Ukraine’s supply of rare earths as he seeks to broker an agreement to end its war with Russia.

As a businessman, Mr. Trump had two dealings with Canada that, while relatively limited, were both failures. The Toronto hotel and condominium project, owned by a Toronto investor who licensed the Trump name and hired a Trump company to manage it, went into receivership in 2016. The following year, a hotel owned by Malaysian investors bearing the Trump name, again under license and with a similar management contract, opened in Vancouver, British Columbia. (Promotional material exaggerated the building’s height.) It failed, as well.

Both hotels, which now operate under different names and management, were magnets for protesters in a country where Mr. Trump has long been unpopular for his “America First” views and disparagement of Canada. Before the Vancouver opening, the city’s mayor at the time, Gregor Robertson, wrote to the building’s owners asking that they not use the Trump name on it.

“Trump’s name and brand have no more place on Vancouver’s skyline than his ignorant ideas have in the modern world,” Mr. Robertson wrote.

Before delving into politics, Mr. Trump expressed little ill will toward Canada.

In 2012, when the Obama administration was delaying a decision on approving the Keystone XL Pipeline, which would have transported oil from Canada to the United States, Mr. Trump declared on social media that the project must move forward.

“We need to use our resources and support allies like Canada,” Mr. Trump said.

But by 2015, his perceived failings of the North American Free Trade Agreement between the United States, Canada and Mexico became a central issue of Mr. Trump’s first presidential campaign. Mr. Trump routinely called the deal a “disaster” for American workers, and prioritized scrapping the pact as a first order of business if he won the election.

An agreement to overhaul the trade deal was signed in 2020 after fraught negotiations between the three countries that often grew contentious. At one point, Mr. Trump suggested leaving Canada on the sidelines and proceeding with a deal between the United States and Mexico.

Now back in office, Mr. Trump has made clear that the agreement he signed did not do enough for the United States and must be rewritten. In recent days he has lashed out at Chrystia Freeland, the Canadian official who negotiated it on behalf of Canada.

“She’s a whack,” Mr. Trump said of Ms. Freeland, who was Canada’s deputy prime minister and finance minister during the president’s first term, in an interview with The Spectator.

As Mr. Trump has wielded the threat of new tariffs on Canada over the last month, his tone toward the departing prime minister has been even more derisive. He has nicknamed Mr. Trudeau “governor” amid persistent suggestions that the United States might annex Canada.

Mr. Trump even called for the former Canadian hockey player Wayne Gretzky to run for prime minister, suggesting late last year that he would “win easily.” Mr. Gretzky, who does not support Canada’s joining the United States, has faced backlash at home from citizens who view him as a traitor because of his association with Mr. Trump.

The insults have led to a boom in nationalism in Canada, including “Made in Canada” Facebook groups. In one group, which has more than a million members, Canadians compared notes on pancake mixes that are made in Canada and offered recommendations on flavors of Cove Soda, a potential alternative to Coca-Cola.

“There’s a generalized sense of patriotism that has not been evident in Canada in many years in response to Trump and Trump’s hostility,” said Ira Wells, a professor at the University of Toronto’s Victoria College.

But Mr. Trump appears unfazed by Canada’s declarations of independence. He indicated last week that the United States was also prepared to sever ties with Canada without changes to the trade relationship between the two countries.

The United States, Mr. Trump said, has no need for Canadian products such as lumber, and he asserted that Canada could not survive without American military protection and favorable trade terms.

“I love Canada, I love the people of Canada,” Mr. Trump said at a cabinet meeting at the White House. “It’s not fair for us to be supporting Canada — If we don’t support them, they don’t subsist as a nation.”

Now it’s bracing for what could be another shock to its business: the tariffs that President Trump is threatening to impose on goods imported from Canada and Mexico. About a third of the nearly one million cars Nissan sold in the United States last year were assembled in Mexican plants.

“If it kicks in,” the automaker’s chief executive, Makoto Uchida, said in an earnings conference call last month, “that is going to be a huge impact to profit.”

Almost all automakers would be affected by the tariffs. But the impact could fall most heavily on those already facing financial trouble. That includes not just Nissan but also Stellantis, the maker of Chrysler, Dodge, Jeep and Ram vehicles, which is racing to reorganize and streamline its operations.

Mr. Trump has suggested levies of as much as 25 percent on most goods manufactured in Canada and Mexico — both trading partners of the United States and members of a North American trade bloc that has operated essentially as a tariff-free trade zone for the last three decades.

A tariff of that size would significantly increase automakers’ costs, raise the prices consumers pay for new cars and trucks, and disrupt complex supply chains that often involve engines, transmissions and other components crossing borders several times before finished vehicles arrive on dealer lots.

The Trump administration has not yet explained how the tariffs would apply to U.S.-made engines and other parts that are sent to Canadian and Mexican plants before returning to the United States in completed vehicles.

For many automakers and parts suppliers, the tariffs would probably force them to cut jobs and production, and rethink their manufacturing strategies in North America.

Anderson Economic Group, a consulting firm in East Lansing, Mich., estimates that tariffs of 25 percent would add $1,000 to $4,000 to the price of a new vehicle, and as much as $10,000 if manufacturers are unable to take steps to reduce the impact.

“Manufacturers and suppliers are going to get stuck eating some of the cost that is imposed on them in a hasty tariff, as sticker prices on retail cars and existing sales contracts cannot be changed immediately,” the firm’s chief executive, Patrick Anderson, said.

Last week, Stellantis reported that net income in 2024 fell 70 percent, to 5.5 billion euros, or $5.7 billion. Its chief executive resigned late last year, and the company may not have a replacement for several more months.

In a recent earnings call, John Elkann, the automaker’s chairman, said that last year “is a year we are not proud of.”

Mr. Elkann acknowledged that the tariffs could make a turnaround harder for Stellantis. About a third of its highly profitable Ram pickups are assembled in a plant in Saltillo, Mexico. It also makes two Jeep models at a second Mexican plant, in Toluca. It makes Chrysler Pacifica minivans at a plant in Windsor, Ontario, and is scheduled to begin making the Dodge Charger in the same factory this year. A second plant, in Brampton, Ontario, is being retooled, with plans to make Jeeps there when it reopens.

Mr. Elkann said the company was preparing a series of measures to limit the impact of tariffs, but declined to provide details. It is possible that the automaker could increase Ram production in its U.S. truck plants and cut output from Saltillo.

“We are prepared and have different scenarios in place,” Mr. Elkann said. “Which of these scenarios will play out is premature for us to discuss.”

Like Stellantis, General Motors makes a significant portion of its pickup trucks in Mexico, in addition to the Chevrolet Blazer and GMC Terrain sport utility vehicles. It has said it could soften the blow of any tariffs by adjusting its production to make more vehicles in U.S. plants and import fewer from Mexico and Canada.

But G.M. is on much stronger financial footing than other large automakers. The company’s sales have been growing in North America, its most profitable market, and it has been scaling back struggling divisions, including its operations in China, and has shuttered its self-driving taxi division, Cruise.

Ford Motor — another manufacturer in the midst of a turnaround — makes the Mustang Mach-E electric vehicle in Mexico. It also has a plant in Canada that is scheduled to start making large pickup trucks next year. While a majority of its models are assembled in U.S. plants, it relies on Mexican plants and suppliers for a quarter or more of the parts that go into many of its models.

Ford’s chief executive, Jim Farley, said in a recent investor presentation that tariffs would “blow a hole” in the U.S. auto industry.

Volkswagen could also feel a squeeze from tariffs as it works to cut costs and reinvigorate its bottom line.

In 2024, Volkswagen sold more than 230,000 Mexican-made vehicles in the United States, about 60 percent of its sales in the country, the company said.

That includes three of Volkswagen’s top-selling vehicles in the United States — the Jetta sedan and the Taos and Tiguan S.U.V.s. The company has one factory in the United States, in Chattanooga, Tenn., where it makes other S.U.V.s.

For Nissan, tariffs could force a broad reshaping of its manufacturing footprint. New levies on goods made in Canada and Mexico would raise Nissan’s costs at a time when it is scrambling to slash expenses.

Amid a global slump in sales, the automaker reported a loss of 14.1 billion yen, or $93.6 million, for the three-month period from October through December, compared with a profit of ¥29.1 billion in the same period in 2023.

The company also revised down its outlook, saying it expected a loss of ¥80 billion in the fiscal year that ends March 31.

As part of its turnaround plan, Nissan aims to cut global production by about 20 percent, which would include closing three plants and shedding some 9,000 workers. Since ending merger talks with Honda, the company has been looking for a new partner or investor to support its recovery effort.

Mr. Trump’s proposed tariffs would complicate that task. Last year, Nissan sold more than 300,000 Mexican-made cars in the United States. They include the Sentra, Versa and Kicks models.

Mr. Uchida said Nissan could shift production of those models to plants in Japan, a country Mr. Trump has not targeted for new tariffs — at least so far.

“Some of these models could be produced in Japan,” he said. “So that’s one backup plan to respond to the possible 25 percent tariff.”