*

Tariffs on Canadian, Mexican, Chinese goods come into

force

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China say it's ready for tariff war or 'any other type of

war'

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Trump says more tariffs coming April 2

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U.S. Commerce chief says Trump may work out partial

solution

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Canada's Trudeau tells Trump, 'this is a very dumb thing

to do'

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Rattled financial markets lose ground

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Target ( TGT ), Best Buy warn of price hikes from Trump's tariffs

By David Lawder, David Ljunggren and Kylie Madry

WASHINGTON, March 4 (Reuters) - U.S. President Donald

Trump's new 25% tariffs on imports from Mexico and Canada took

effect on Tuesday, along with fresh duties on Chinese goods,

sparking trade wars that could slam economic growth and raise

prices for Americans still smarting from years of high

inflation.

The moves, which could upend nearly $2.2 trillion in annual

trade, came after Trump declared that the top three U.S. trading

partners had failed to do enough to stem the flow of fentanyl

and its precursor chemicals into the U.S.

In an address to Congress, Trump said further tariffs would

follow on April 2, including "reciprocal tariffs" and non-tariff

actions aimed balancing out years of trade imbalances.

"Other countries have used tariffs against us for

decades, and now it's our turn," Trump said, citing high duties

imposed on U.S. goods by India, South Korea, the European Union,

China and others.

China's foreign affairs ministry shot back defiantly: "If

war is what the U.S. wants, be it a tariff war, a trade war or

any other type of war, we're ready to fight till the end."

Commerce Secretary Howard Lutnick told reporters that

U.S. officials had spoken with Mexico and Canada "all day" and

might still work out a partial resolution with the two

neighbors, adding that they needed to do more on the fentanyl

front.

"I think there'll be some movement. It will not

eliminate the tariffs ... but it might modify the tariffs

somewhat," he said, pointing to a decision on Wednesday.

Lutnick said Trump was considering providing some relief

to companies that comply with rules under the U.S.-Mexico-Canada

Agreement on trade that is due for renegotiation in 2026.

Trump hailed his tariff agenda, his efforts to curb the

fentanyl overdose crisis and a Ukraine minerals deal during a

nationally televised address to a joint session of Congress on

Tuesday night.

RETALIATION STARTS

Canadian Prime Minister Justin Trudeau described the tariffs

as "a very dumb thing to do" and hit back with 25% tariffs on

C$30 billion ($20.7 billion) worth of U.S. imports, including

orange juice, peanut butter, wine, spirits, beer, coffee,

appliances and motorcycles.

Mexican President Claudia Sheinbaum vowed retaliation but

without details, saying she would announce Mexico's response on

Sunday.

Lutnick's comments on negotiations lifted the Canadian

dollar and the Mexican peso off of deep losses earlier on

Tuesday, but Trump's tariffs prompted a global stock sell-off.

China responded immediately, announcing additional tariffs

of 10%-15% on certain U.S. imports from March 10 and a series of

new export restrictions for designated U.S. entities. Later it

raised complaints about the U.S. tariffs with the World Trade

Organization.

Trudeau said Canada would impose tariffs on another C$125

billion of U.S. goods if Trump's tariffs were still in place in

21 days, likely to include motor vehicles, steel, aircraft, beef

and pork. Canada also will challenge the U.S. tariffs under

rules of the WTO and the U.S.-Mexico-Canada free trade

agreement.

"They've chosen to launch a trade war that will, first and

foremost, harm American families," Trudeau said of the Trump

administration.

Trudeau said that he believes Trump instead wants to weaken

the Canadian economy to the point where Ottawa would consider

annexation by the U.S.

Ontario Premier Doug Ford tore up a C$100 million contract

with Elon Musk's Starlink network, banned U.S. firms from

provincial government contracts and said that if Trump's tariffs

persist, he will apply a 25% surcharge to Ontario electricity

exports to the U.S.

"Please explain to Governor Trudeau, of Canada, that when he

puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff

will immediately increase by a like amount!" Trump wrote in a

post on his private social media platform.

PRICE HIKES

The tariffs were already sparking some U.S. price increases,

running counter to Trump's election vow to bring down living

costs for Americans.

Target ( TGT ) CEO Brian Cornell told CNBC that the retail

giant would increase prices "over the next couple of days" on

some seasonal grocery products such as avocados from Mexico.

Electronics retailer Best Buy also warned of potential

higher prices. The company's CEO Corie Barry told analysts on a

call that China remains the top source of products sold by the

company, with Mexico in second place.

The 20% tariff on Chinese imports will apply to several key

Chinese electronics categories untouched by prior duties,

including smart phones, laptops, video game consoles, smart

watches and speakers and Bluetooth devices.

"We estimate the tariffs could lead to a nearly $1,000 per

household increase annually in the cost of goods," said

Nationwide Mutual chief economist Kathy Bostjancic. "The

strengthening dollar helps mitigate some of the inflation

impact, which would otherwise be greater."

STACKING CHINA TARIFFS

An extra 10% duty on Chinese goods took effect Tuesday,

adding to a 10% tariff imposed by Trump on February 4 and

stacking on top of tariffs of up to 25% imposed on Chinese

imports during Trump's first term.

Tariffs on some of these products increased sharply under

former President Joe Biden last year.

China's retaliatory tariffs targeted a wide range of U.S.

agricultural products including certain meats, grains, cotton,

fruit, vegetables and dairy products.

U.S. farmers were hard hit by Trump's first-term trade wars,

which cost them about $27 billion in lost export sales and

conceded their share of the Chinese market to Brazil.

The tariffs on Mexican and Canadian products could have deep

repercussions for a highly integrated North American economy and

halt years of surprising resilience for U.S. growth.

The Federal Reserve Bank of Atlanta's GDPNow model showed a

stunning shift to a 2.8% U.S. GDP contraction in the first

quarter, from a 2.3% estimated growth last week.