NEW YORK (Reuters) -Global markets buckled up for a turbulent session on Monday after U.S. President Donald Trump launched a trade war with sweeping tariffs on Canada, Mexico and China that threaten to undermine economic growth and reignite inflation.

U.S. stock futures slumped in early Asian hours, with Nasdaq futures down 2.35% and S&P 500 futures 1.8% lower.

Canadian Prime Minister Justin Trudeau announced plans for retaliatory tariffs on imports of goods from the United States, the first of which also would take effect on Tuesday. Claudia Sheinbaum, Mexico's president, said on social media platform X that she will spell out details of its response on Monday.

The two countries and the largest trading partners of the United States. China also said it would take "counter measures," and the president said Americans may feel "some pain".

U.S. oil prices jumped more than $2 as Asian trade began on Monday while gasoline futures jumped more than 3%.[O/R]

Uncertainty over how and for how long the tariffs will be wielded brought fresh upset for markets that were dealt a blow last week as the emergence of China's DeepSeek AI model hit tech stocks.  

The White House has not yet published all the details of the tariff plan, leaving questions about their impact and duration, while some analysts continued to game out the chances last-minute negotiations delay or avoid them altogether.

Trump's unspecified "pain" could come in the form of lower U.S. corporate profits and more inflation, potentially upending U.S. interest rate cut expectations, and further weaken currencies such as the Canadian dollar and China's yuan. 

"Until now the market has really been on Trump's side, but that could change and the market could challenge him for the first time," said Mark Malek, chief investment officer at Siebert Financial in New York.

In three executive orders, Trump imposed 25% tariffs on Mexican and most Canadian imports and 10% on goods from China, starting on Tuesday.

Canada said it will respond with 25% tariffs against $155 billion of U.S. goods, beginning with $30 billion taking effect Tuesday and $125 billion 21 days later.

"It's negative for CAD, MXN and CNH, as well as overall risk," Nick Twidale, chief market analyst at ATFX Global in Sydney said referring to the Canadian, Mexican and Chinese currencies. 

China's offshore yuan weakened to a record low of 7.3765, while the dollar touched a more than 20-year high against its Canadian counterpart. The dollar also strengthened more than 2% against the Mexican peso.

Mexico's peso would suffer a near-12% fall if the United States hits the country with 25% trade tariffs, JPMorgan estimated in a note published on Friday.

The euro slid more than 1% and hit a two-year low. [FRX/]

Analysts are also preparing for a selloff in stocks and other higher-risk assets. 

If tariffs are imposed and look set to stick around, possibly for months, "stocks should sell off although sector sensitivity would vary" Morgan Stanley researchers said in a note.

With the S&P 500 near all-time highs, the index could move 3% to 5% in either direction in the short term, Evercore ISI strategists said in a note. 

TARIFF PAIN   

Barclays strategists previously estimated that the tariffs could create a 2.8% drag on S&P 500 company earnings, including the projected fallout from retaliatory measures from the targeted countries.

The executive order includes a provision for Trump to increase the size and scope of the tariffs if countries affected seek to retaliate. 

Goldman Sachs economists have estimated that across-the-board tariffs on Canada and Mexico would imply a 0.7% increase in core inflation and a 0.4% hit to gross domestic product.

The bank said in a note on Sunday it expects to update those estimates, and predicted the measures would not be permanent.

"In light of their potential economic effects and the fact that the White House has set general conditions for their removal, we think it is more likely that the tariffs will be temporary but the outlook is unclear," it said in a note.

The potential to drive up consumer prices is a particularly sensitive area for investors, who are worried about a revival in inflation causing the Federal Reserve to stop cutting rates. 

The Fed last week paused its rate-cutting cycle, while Fed Chair Jerome Powell said officials were "waiting to see what policies are enacted" with the new president. 

European Central Bank policymaker Klaas Knot said on Sunday he expects new tariffs will lead to higher inflation and interest rates in the U.S. that will likely weaken the euro. 

Assuming tariffs contribute to a surge in inflation, the U.S. central bank is less likely to enact the interest rate cuts markets broadly see as catalysing growth, Capital Economics Chief North America economist Paul Ashworth said in a note.

"Under those circumstances, the window for the Fed to resume cutting interest rates at any point over the next 12 to 18 months just slammed shut," he said.