On Sunday, President Donald Trump acknowledged that the extensive tariffs he has implemented on Mexico, Canada, and China might lead to “short term” economic challenges for Americans.

This announcement came as global markets reacted with concern that the tariffs could adversely affect economic growth and reignite inflationary pressures.

Trump indicated that he would be discussing the situation with the leaders of Canada and Mexico on Monday.

Both countries have announced their own retaliatory tariffs in response. However, Trump tempered expectations for any significant changes in his stance, stating, “I don’t expect anything dramatic.”

He emphasized that these countries owe financial obligations to the U.S. and expressed confidence that they would fulfill them.

In addition to his dealings with North America, Trump confirmed that tariffs on the European Union are also “definitely” on the table, although he did not specify a timeline for their implementation.

Critics argue that Trump’s strategy to impose tariffs—25% on Canada and Mexico and 10% on China—could hinder global economic growth and increase consumer prices in the U.S. Trump,

however, maintains that these tariffs are essential to address issues related to immigration and drug trafficking while also promoting domestic manufacturing.

He acknowledged the potential for short-term pain but assured that the long-term benefits would outweigh the costs, asserting that the U.S. has been unfairly treated by many nations over the years.

The initial reaction from financial markets was negative, with U.S. stock futures experiencing a significant decline in early Asian trading.

Specifically, Nasdaq futures dropped by 2.35% and S&P 500 futures fell by 1.8%. In contrast, U.S. oil prices surged by more than $2, and gasoline futures rose by over 3%.

Industries across North America, from automobiles to consumer goods and energy, are preparing for the impact of these new tariffs.

Economists noted that Trump’s tariffs could encompass nearly half of all U.S. imports, which would demand a substantial increase—more than double—in domestic manufacturing output to fill the gap, a challenge deemed impractical in the near term by analysts at ING.

The analysts further remarked that escalating trade tensions tend to create adverse conditions for all countries involved.

There are also predictions that the tariffs could potentially lead Canada and Mexico into recession, resulting in “stagflation”—a scenario characterized by high inflation, stagnant economic growth, and elevated unemployment in the U.S.