President Donald Trump said the sweeping tariffs that he has imposed on Mexico, Canada and China may cause "short term" pain for Americans as global markets reflected concerns the levies could undermine growth and reignite inflation.
Trump said he would talk on Monday with the leaders of Canada and Mexico, which have announced retaliatory tariffs of their own, but downplayed expectations that they would change his mind.
"I don't expect anything dramatic," Trump told reporters as he returned to Washington from his Mar-a-Lago estate in Florida. "They owe us a lot of money, and I'm sure they're going to pay."
He also said tariffs would "definitely happen" with the European Union, but did not say when.
Economists said the Republican president's plan to impose 25 per cent tariffs on Canada and Mexico and 10 per cent tariffs on China - the United States' three largest trading partners - will slow global growth and drive prices higher for Americans.
Trump says they are needed to curb immigration and narcotics trafficking and spur domestic industries.
"We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world," he said.
Financial market reaction on Monday reflected concerns about the fallout from a trade war. US stock futures NQc1, EScv1 fell more than 2 per cent. Shares across Asia, including Hong Kong .HSI, Tokyo .N225 and Seoul .KS11 also slid around 2 per cent. The mainland China market was shut for Lunar New Year holidays.
The Chinese yuan, Canadian dollar and Mexican peso all slumped against a soaring dollar. With Canada and Mexico the top sources of US crude oil imports, US oil prices CLc1 jumped more than $1 (AED 3.6), while gasoline futures RBc1 rose 3 per cent.
North American companies braced for new duties which could upend industries from autos to consumer goods to energy.
Trump's tariffs will cover almost half of all US imports and would require the United States to more than double its own manufacturing output to cover the gap - an unfeasible task in the near term, ING analysts wrote.
"Economically speaking, escalating trade tensions are a lose-lose situation for all countries involved," the analysts wrote in a note on Sunday.
Other analysts said the tariffs could throw Canada and Mexico into recession and usher in "stagflation" - high inflation, stagnant economic growth and elevated unemployment - at home.
The Trump tariffs, outlined in three executive orders, are due to take effect on Tuesday.
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