US President Donald Trump confirmed that starting Tuesday, 25% tariffs will be imposed on imports from Mexico and Canada, raising fears of a trade war. The move, which the US claims targets drug trafficking and trade imbalances, has already rattled markets and prompted retaliatory warnings from both nations.

US President Donald Trump said Monday, March 3, that 25% taxes on imports from Mexico and Canada would start Tuesday, sparking renewed fears of a North American trade war that already showed signs of pushing up inflation and hindering growth.

“Tomorrow – tariffs 25% on Canada and 25% on Mexico. And that’ll start,” Trump told reporters in the Roosevelt Room. “They’re going to have to have a tariff.”

Trump has said the tariffs are to force the two US neighbors to step up their fight against fentanyl trafficking and stop illegal immigration. But Trump has also indicated that he wants to even the trade imbalance with both countries as well and push more factories to relocate in the United States.

His comments quickly rattled the US stock market, with the S&P 500 index down 2% in Monday afternoon trading. It’s a sign of the political and economic risks that Trump feels compelled to take, given the possibility of higher inflation and the possible demise of a decades-long trade partnership with Mexico and Canada.

Yet the Trump administration remains confident that tariffs are the best choice to boost US manufacturing and attract foreign investment. Commerce Secretary Howard Lutnick said Monday that the computer chipmaker TSMC had expanded its investment in the United States because of the possibility of separate 25% tariffs.

In February, Trump put a 10% tariff on imports from China. He reemphasized Monday that the rate would be doubling to 20% on Tuesday.