President Trump’s new tariffs on Canada, Mexico and China prompted swift retaliation Tuesday, igniting a sudden trade war that economists warned could lead to an economic crisis if it drags on.

Mr. Trump followed through on his threat to slap a 25% tariff on goods imported from Canada and Mexico. The president also doubled to 20% an existing tariff on most imports from China.

The new tariffs spooked investors, thrusting the stock market into turmoil with a selloff that started late Monday and continued throughout Tuesday, eliminating months of gains.

In an interview, Commerce Secretary Howard Lutnick told Fox News that Canada and Mexico are now eager to work out a deal to blunt the tariffs but they won’t be paused.

“The president is listening because, you know, he’s very, very fair and very reasonable. So I think he’s going to work something out with them,” Mr. Lutnick said. “And we are probably going to be announcing that tomorrow.”

Earlier Tuesday, Canada and China announced immediate retaliatory tariffs on U.S. goods. Mexican President Claudia Sheinbaum said she will announce reciprocal tariffs and other penalties against the U.S. on Sunday.

Democrats and other critics of the new tariffs said they will punish Americans already struggling to afford groceries, gas and housing.

“I don’t think this is going to be seen very positively by the American people,” Senate Minority Leader Charles E. Schumer, New York Democrat, said.

But a top supporter of Democrats, the United Auto Workers, praised Mr. Trump.

“Tariffs are a powerful tool in the toolbox for undoing the injustice of anti-worker trade deals. We are glad to see an American president take aggressive action on ending the free trade disaster that has dropped like a bomb on the working class,” UAW officials said in a statement.

The Trump administration stood by the tariffs, arguing they will equalize unfair trade practices, particularly with China, and will strengthen the economy by returning manufacturing and jobs to America.

Honda announced Monday it will move a manufacturing plant for the new Honda Civic Hybrid from Mexico to Indiana and Taiwan Semiconductor Manufacturing Company (TSMC) announced plans to invest at least $100 billion in five semiconductor chip factories in the U.S., mainly in Arizona, to avoid the looming tariffs.

“Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers. We are going to rebalance the economy,” Treasury Secretary Scott Bessent said on Fox News.

Mr. Bessent said he believes Chinese manufacturers “will eat the tariffs,” rather than pass the cost along to consumers.

The new tariffs are reduced to 10% for energy products, but those prices are poised to rise more significantly.

Ontario Premier Doug Ford announced Tuesday he’ll add a retaliatory 25% surcharge on electricity the province exports to Minnesota, New York and Michigan.

“We will not hesitate to shut off their power as well,” Mr. Ford said.

Canadian Prime Minister Justin Trudeau called the tariffs “unjustified,” and in response announced a plan to impose reciprocal 25% tariffs on $155 billion in American goods, starting with $30 billion worth of goods immediately on bourbon, orange juice, appliances and more. The remaining tariffs would go into effect in 21 days.

Canada already imposes steep tariffs on many American exports, including chicken, beef, butter, cheese, barley and wheat.

Mr. Trump warned the United States will hike tariffs higher if Canada retaliates.

“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!” Mr. Trump said on social media, referring to his plan to annex Canada as the 51st state.

Mr. Trump frequently threatened to impose tariffs during his presidential campaign but even some of his most ardent supporters thought tariffs would be used as a threat and not carried out.

But the president sees tariffs as a way to raise billions of dollars to pay for tax cuts, including eliminating taxes on tipped wages and overtime pay, and ending taxes on Social Security checks for retirees.

“Tariffs are easy, they are fast, they are efficient and they bring fairness,” Mr. Trump said.

He wants to end the trade imbalance with Canada, which amounted to $63.3 billion in 2024. Canadian economists say the bulk of that deficit comes from heavy U.S. imports of Canadian energy.

“This is a tool that he uses,” House Majority Whip Tom Emmer, Minnesota Republican, said. “He’s fighting for the American people, and he’s going to make sure that we get treated fairly by the people who want to do business with us around the world. They can posture, they can puff their chest and do whatever they want. They want access to the greatest markets in the world, which are right here in the U.S.A.”

The president initially said the tariffs are a response to the continued problem of deadly fentanyl pouring over the southern border from Mexico and to a lesser extent across the northern border from Canada. More than 70,000 people in the U.S. died from fentanyl poisoning last year. The opioid drug is mostly produced in Mexico with ingredients from China.

“We need to see real engagement on the fentanyl issue, on the drug issue,” Vice President J.D. Vance said Tuesday. “Fundamentally, the underlying element of these tariffs is we think that the Canadians have not been serious about stopping the drug trade.”

Both Canada and Mexico announced initiatives and spending to crack down on drug smuggling, which led Mr. Trump to pause the tariffs for a month.

Mr. Trudeau said less than 1% of fentanyl that crosses into the U.S. comes from Canada and that fentanyl seizures on the Canadian border have declined 97% to nearly zero in January.

Mr. Trudeau said Mr. Trump is using fentanyl as an excuse for the new tariffs.

“Canadians are reasonable, and we are polite, but we will not back down from a fight,” he said.

Additional tariffs are coming, Mr. Trump said.

New tariffs on steel and aluminum are set to begin this month and the president plans tariffs on some European Union imports, including agricultural products, beginning in April.

Mr. Trump is also weighing a 25% tariff on cars and trucks imported from Europe, much to the satisfaction of U.S. auto workers.

“We look forward to working with the White House to shape the auto tariffs in April to benefit the working class,” UAW officials said. “We want to see serious action that will incentivize companies to change their behavior, reinvest in America, and stop cheating the American worker, the American consumer, and the American taxpayer.”

• Alex Miller contributed to this report.

• Susan Ferrechio can be reached at sferrechio@washingtontimes.com.