On Sunday, President Donald Trump stated that the tariffs he imposed against Mexico, Canada, and China could cause “some pain” to Americans. Wall Street and U.S. trade partners expressed hope that the war of words would not last for long.

Trump, who started his second term in office on January 20, defended the tariffs he announced Saturday. Canada and Mexico have said that they are working together against the 25% U.S. duty on imports. This will shake up the economies of the three North American countries which have enjoyed free trade agreements for many decades.

Canada and Mexico both immediately announced retaliatory actions after Trump’s announcement Saturday. China announced that it would contest Trump’s 10% tariffs in the World Trade Organization, and take unspecified measures as a countermeasure.

Critics claimed that the actions against the three biggest U.S. trade partners would hurt Americans, by increasing prices and slowing down global growth.

Trump defended his Sunday decision on social media.

The USA has large deficits with Canada and Mexico (and virtually all countries!) The United States owes more than 36 trillion dollars and will no longer be called a “Stupid Country”.

Trump wrote in capital letters: “This will be America’s golden age!” Will there be pain? Maybe (and yes, it’s possible! ).”

Trump didn’t specify what “some pain” meant to him.

Greg Daco, Chief Economist at EY, has developed a model to gauge the economic impact of Trump’s tariff plan. It suggests that it will reduce U.S. growth by 1.5 percentage point this year. It would also throw Canada and Mexico in recession, and bring “stagflation”, or high inflation, stagnant growth, and elevated unemployment, here.

The financial markets were closed for the weekend, but you will feel the effects when U.S. Stock Futures Trading begins at 6 p.m. ET (2300 GMT) on Sunday. Sunday, 2300 GMT (ET) Analysts said that the markets were anxiously awaiting any developments, but there was some hope, particularly with Canada and China.

Goldman Sachs economists wrote in a Sunday note that “with only two days until implementation, tariffs appear likely to go into effect. However, a last minute compromise cannot be completely excluded.”

The White House said that the levies would likely be temporary because the conditions set by the White House for their removal were very general. “But the outlook is uncertain.”

Three executive orders defining the Trump tariffs are set to go into effect at 12:01 am ET on Tuesday. Tuesday, ET (0501 GMT). Trump promised to maintain them until the end of what he called a national crisis over fentanyl – a deadly opioid – and illegal immigration into the United States.

China has left the door wide open for dialogue with the United States. The fentanyl issue was the subject of its most vehement opposition.

China’s Foreign Ministry said that the United States is responsible for the problem of fentanyl, and added that China has taken extensive steps to combat it.

Kirsten Hillman – Canada’s ambassador in the United States – expressed hope on Sunday for an agreement.

Hillman, on ABC’s This Week program, said: “We hope that they won’t go into effect on the Tuesday.”

Hillman said that Canadian officials were ready to continue talking with the United States, but that Canadians expected that their government “stands for itself.”

Trump’s remarks about Canada were particularly dismissive. He called for Canada to become the United States’ 51st state, and said that it “ceases its existence as a viable nation” without the “massive subsidies.”

A Reuters/Ipsos survey released last week revealed that Americans are divided over tariffs. 54% of Americans oppose new duties on imported products and 43% support them. Democrats were more opposed to the idea and Republicans more in favor.

Following Through

Trump made good on his repeated threats during the presidential campaign of 2024 and since he took office. He ignored warnings by top economists about a new global trade war that would reduce U.S. growth and increase prices for both consumers and businesses.

Trump, who is less than two weeks old in his second term of office, is already upsetting the norms that govern how the United States interacts with the world and its neighbors.

Trump declared a national emergency in accordance with the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act, to support the tariffs. These laws give the president broad powers to impose penalties to deal with crises.

Trade lawyers claimed that Trump was testing the limits set by U.S. law and that the tariffs may face legal challenges. Democratic lawmakers Suzan delBene, and Don Beyer condemned what they called an abuse of executive authority.

Republicans welcomed Trump’s actions. Democrats and industry groups warned about the price impact.

Who will suffer the most? “American consumers will be hit with skyrocketing costs for everything, from gas to groceries and cars,” U.S. Rep. Josh Gottheimer wrote in social media.

INVESTORS: Look Ahead

Investors weighed the impact of Trump’s additional tariffs, which included those on oil and gas as well as steel and aluminum, semiconductors and pharmaceuticals. Trump has also threatened to take action against the European Union.

Marchel Alexanderovich, of Saltmarch Economics London, said: “It is only a question of time until the EU becomes a target.”

The European Union stated that it was unaware of any additional tariffs imposed on EU goods. The European Commission spokesperson stated that tariffs hurt both sides, but the EU would “respond firmly” to any trading partners who unfairly or arbitrarily impose tariffs on EU products.

Volkswagen, Europe’s largest carmaker, said that it relied on negotiations to avoid a trade war.

The auto industry would be hit particularly hard by the new tariffs, which are imposed on vehicles manufactured in Canada and Mexico. This will burden a large regional supply chain, where parts may cross multiple borders before they reach their final assembly.

HURTING AMERICANS

Justin Trudeau, Canadian prime minister, said in a message to Americans that Americans would suffer from rising food and gas prices, the potential closure of auto assembly lines, and limited metal and mineral supplies. Trudeau called on Canadians to boycott American goods and services.

Trudeau announced on Saturday night that Canada will impose 25% tariffs on $155 billion worth of U.S. products, including beer and wine, lumber, and appliances. The first $30 billion in tariffs would take effect on Tuesday, and the remaining $125 billion within 21 days.

The Mexican president, Claudia Sheinbaum, did not give any details about the planned tariffs.

The White House released a fact sheet that said tariffs would remain in place until the crisis was resolved, but did not provide any details about what the three countries might do.