US President Donald Trump is expected to sign an order imposing hefty new tariffs of 25 per cent on goods from Mexico and Canada and 10 per cent on imports from China, threatening to ignite a trade war that could disrupt more than $US2.1 trillion ($A3.4 trillion) of annual trade.
Trump, who is at his Mar-a-Lago estate in Florida this weekend and spent Saturday morning golfing, said on Friday that there was little that the top three US trading partners could do to forestall the tariffs.
On Saturday, a source familiar with the matter said the US had formally informed Canada that tariffs would be imposed, and the Canadian news channel CBC reported they would take effect on Tuesday.
Trump set the February 1 deadline to press for strong action to halt the flow of the opiate fentanyl and precursor chemicals into the US from China via Mexico and Canada, as well as to stop illegal immigrants crossing US borders.
Less than two weeks into his second term, Trump is upending the norms of how the United States is governed and interacts with its neighbours and wider world.
On Friday, he pledged to proceed with the levies despite acknowledging they could cause disruption and hardship for American households.
A model gauging the economic impact of Trump's tariff plan from EY Chief Economist Greg Daco suggests it would reduce US growth by 1.5 percentage points this year, throw Canada and Mexico into recession and usher in "stagflation" at home.
"We have stressed that steep tariff increases against US trading partners could create a stagflationary shock - a negative economic hit combined with an inflationary impulse - while also triggering financial market volatility," Daco wrote on Saturday.
That volatility was evident on Friday, when the Mexican peso and Canadian dollar both slumped after Trump vowed to fulfil his threats. US stock prices also fell and Treasury bond yields rose.
Until now, the prevailing assumption among investors, economists and the business community was that Trump had been floating the tariff threats to provide an impetus for negotiations and that he would ultimately hold off or start more slowly. But during a lengthy White House exchange with reporters on Friday, Trump brushed aside the notion that his threats were merely bargaining tools:
"No, it's not ... we have big (trade) deficits with, as you know, with all three of them."
He also said revenue was a factor and the tariffs may be increased, adding: "But it's a lot of money coming to the United States."
Trump did, however, mention a potential carve-out for oil from Canada, saying that tariff rate would be 10 per cent. But he indicated that wider tariffs on oil and natural gas would be coming in mid-February, remarks that sent oil prices higher.
At nearly $US100 billion ($A160 billion) in 2023, imports of crude oil accounted for roughly a quarter of all US imports from Canada, according to US Census Bureau data.
Trump acknowledged that higher costs could be passed on to consumers and that his actions may cause short-term disruptions, but said he was not concerned about their impact on financial markets.
Jake Colvin, president of the National Foreign Trade Council, which represents major US companies, said imposing tariffs on key trading partners "could impact the cost and availability of everything from avocados to air conditioners to cars and risks shifting the focus of our relationships away from constructive dialogue".
Although Trump speaks of "charging" other nations for tariffs, they are paid by importing companies, and sometimes passed on to consumers.
Automakers would be particularly hard hit, through tariffs on vehicles assembled in Canada and Mexico. Their vast regional supply chain, where components can cross borders several times before final assembly, would further exacerbate these costs.
And Trump said import taxes were also being considered on European goods, as well as on steel, aluminium and copper, and on drugs and semiconductors.
Trump's move is expected to draw retaliatory tariffs, potentially disrupting more than $US2.1 ($A3.4) trillion in annual two-way US trade with its top three trading partners.
