Key takeaways:

• Canada and Mexico retaliate against U.S. tariffs imposed by President Trump, initiating a trade war.
• Canada plans to implement 25% tariffs on over $155 billion worth of U.S. goods starting immediately.
• The trade tensions raise fears of inflation and potential economic turmoil in the U.S. and beyond.

In a significant escalation of trade tensions, Trump's long-threatened tariffs against Canada and Mexico took effect early Tuesday morning, imposing a 25% tax on imports from both countries, alongside a 10% tax specifically on Canadian energy products. In reaction to these tariffs, Canadian Prime Minister Justin Trudeau announced that Canada would impose equivalent tariffs on more than $100 billion worth of U.S. goods over the course of the next three weeks.

Mexican President Claudia Sheinbaum has also indicated that Mexico will respond with its own punitive tariffs against U.S. imports, though specific details were pending as she is expected to make an announcement later in the week. Meanwhile, China has retaliated with new tariffs of 10-15% on selected American goods, intensifying the situation further and creating a web of international trade disputes.

During a press conference, President Trump justified the tariffs as a measure to address illegal immigration and drug trafficking, stating, "It’s a very powerful weapon that politicians haven’t used." Critics, however, have pointed out that the tariffs are unlikely to yield the intended results and could lead to increased prices for American consumers, affecting essential goods including groceries, cars, and gas.

Trudeau criticized the tariffs as unjustified and vowed to respond. "Canada will not let this unjustified decision go unanswered," he emphasized, underscoring the intensity of the dispute. These tariffs follow Trump's earlier imposition of tariffs on China, which he doubled to 20%, further complicating the global economic landscape.

As this trade war unfolds, it raises concerns about broader economic impacts, with fears of inflation and industry fallout becoming more pronounced. As highlighted by analyses, "the world economy is now caught in the fog of what appears to be a trade war," placing uncertainties on international markets.

The fast-moving developments have already seen U.S. equity markets responding negatively, with estimates suggesting that prolonged trade conflict could hamper economic growth. With Trudeau and Sheinbaum poised to continue their retaliatory responses, the situation seems to be evolving rapidly. “The dialogue will continue, but we are ready to respond,” noted Canadian Defense Minister Bill Blair.

For ongoing updates on this developing story, refer to Newsweek and SCMP.