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Tariffs due to take effect at 0501 GMT on Tuesday

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Markets tumble after Trump locks in Canada, Mexico tariffs

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North American imports to get 25% duty, 10% for Canadian

energy

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Trump raises tariffs on Chinese goods to 20% over fentanyl

(Adds tariff notice links, paragraph 8, Ontario premier's

comments and report of Chinese retaliation, paragraphs 11-14)

By David Lawder, Andrea Shalal and Steve Holland

WASHINGTON, March 3 (Reuters) - U.S. President Donald

Trump said 25% tariffs on goods from Mexico and Canada will take

effect from Tuesday, stoking fears of a trade war in North

America and sending financial markets reeling.

Trump's comments made on Monday sent U.S. stocks down

sharply in late afternoon trading. The Mexican peso and Canadian

dollar both fell following his remarks.

"They're going to have to have a tariff. So 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," Trump

said at the White House.

He said there was "no room left" for a deal that would avert

the tariffs by curbing fentanyl flows into the United States.

Trump also reaffirmed that he will increase tariffs on all

Chinese imports to 20% from the previous 10% levy to punish

Beijing for failing to halt shipments of fentanyl to the U.S.

The president said in an order that China "has not taken

adequate steps to alleviate the illicit drug crisis."

CEOs and economists say Trump's tariffs on Canada and

Mexico, covering more than $900 billion worth of annual U.S.

imports, will deal a serious setback to the highly integrated

North American economy.

The tariffs are scheduled to take effect at 12:01 a.m. EST

(0501 GMT) on Tuesday, the Trump administration confirmed in

Federal Register notices. At that point, the U.S. Customs and

Border Protection agency will begin collecting 25% Canadian and

Mexican goods, with a 10% duty for Canadian energy.

Mexico's economy ministry said that there would be no public

response until President Claudia Sheinbaum's regular morning

press conference on Tuesday. She has vowed to respond, saying:

"We have a plan B, C, D."

Canadian Foreign Minister Melanie Joly told reporters that

Ottawa was ready to respond, but offered no specifics.

Ontario Premier Doug Ford told NBC that the U.S. tariffs and

Canada's retaliation would be "an absolute disaster" for both

countries.

"I don't want to respond but we will respond like they've

never seen before," Ford said, adding that Michigan auto plants

would likely shut down within a week and that he would halt

nickel shipments and cross-border transmission of electricity

from Ontario to the U.S.

"I'm going after absolutely everything," Ford said.

China's embassy in Washington did not immediately respond to

a request for comment on Trump's doubled tariffs, but the

state-backed Global Times newspaper said Beijing's

countermeasures would most likely target U.S. agricultural and

food products.

MARKET SWOONS

The Dow Jones Industrial Average fell 649.67 points,

or 1.48%, the S&P 500 lost 104.78 points, or 1.76%, and

the Nasdaq Composite dropped 497.09 points, or 2.64%.

Automaker shares fell sharply, with General Motors ( GM ),

which has significant truck production in Mexico, down 4% and

Ford falling 1.7%.

Gustavo Flores-Macias, a public policy professor at Cornell

University, said consumers could see price hikes within days.

"The automobile sector, in particular, is likely to see

considerable negative consequences, not only because of the

disruption of the supply chains that crisscross the three

countries in the manufacturing process, but also because of the

expected increase in the price of vehicles, which can dampen

demand," Flores-Macias said.

MEXICO'S RESPONSE

Mexico, after avoiding the first round of Trump's tariffs by

striking a last-minute deal to send thousands of troops to its

northern border, has stepped up anti-drug efforts and hinted at

new measures on imported Chinese goods.

According to the Centers for Disease Control and Prevention,

72,776 people died from synthetic opioids in 2023 in the U.S.,

chiefly from fentanyl.

Representative Suzan DelBene, a Democrat from the state of

Washington, said the decision to proceed with tariffs on Canada

and Mexico would cost American families thousands of dollars at

the grocery store, gas station and pharmacy counter.

"No president should be able to raise taxes without a vote

in Congress," she said in a statement.

White House trade adviser Peter Navarro, however, said on

Monday that the inflationary impact from any tariffs would be

"second-order small" and that he did not expect the president to

waver on the measures.

"This is the path that he's chosen," Navarro told CNBC.

Trump on Saturday added another trade action to a cascade of

tariff announcements over the past month, opening a national

security investigation into imports of lumber and wood products

that could result in steep tariffs. Canada, already facing 14.5%

U.S. tariffs on softwood lumber, would be hit particularly hard.

During the prior week, Trump ordered the revival of a tariff

probe on countries that levy digital services taxes, proposed

fees of up to $1.5 million every time a Chinese-built ship

enters a U.S. port and launched a new tariff investigation into

copper imports.

These come on top of his plans for higher U.S. "reciprocal

tariffs" to match tariff rates of other countries and offset

their other trade barriers, a move that could hit the European

Union hard over the value added taxes member states charge.

But Trump's "tariffs on steroids" may keep inflation higher

and could tip the global economy into recession, warned Desmond

Lachman, a senior fellow at the conservative American Enterprise

Institute.