WASHINGTON/OTTAWA — Countries around the world threatened to ratchet up a trade war with the United States on Thursday (April 3) as President Donald Trump's sweeping tariffs ignited fears of steep price increases in the world's largest consumer market.

The penalties announced by Trump on Wednesday triggered a plunge in world financial markets and drew condemnation from other leaders reckoning with the end of a decades-long era of trade liberalisation.

But there were conflicting messages from the White House about whether the tariffs were meant to be permanent or were a tactic to win concessions, with Trump saying they "give us great power to negotiate."

The US tariffs would amount to the highest trade barriers in more than a century: a 10 per cent baseline tariff on all imports and higher targeted duties on some of the country's biggest trading partners.

That could jack up the price for US shoppers of everything from cannabis to running shoes to Apple's iPhone. A high-end iPhone could cost nearly US$2,300 (S$3,067) if Apple passes the costs on to consumers, based on projections from Rosenblatt Securities.

Businesses raced to adjust. Automaker Stellantis said it would temporarily lay off US workers and close plants in Canada and Mexico, while General Motors said it would increase US production.

Canadian Prime Minister Mark Carney said the United States had abandoned its historic role as a champion of international economic co-operation.

"The global economy is fundamentally different today than it was yesterday," he said as he announced a limited set of countermeasures.

Elsewhere, China vowed retaliation for Trump's 54 per cent tariffs on imports from the world's No. 2 economy, as did the European Union, which faces a 20 per cent duty.

French President Emmanuel Macron called for European countries to suspend investment in the United States.

Other trading partners, including South Korea, Mexico and India, said they would hold off for now as they seek concessions.

Washington's allies and rivals alike warned of a devastating blow to global trade.

The tariffs "clearly represent a significant risk to the global outlook at a time of sluggish growth," IMF Managing Director Kristalina Georgieva said in a statement.

"It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty," Georgieva said.

US Commerce Secretary Howard Lutnick and senior trade adviser Peter Navarro both told cable news programmes on Thursday the president would not back off, and that the tariff increases were not a negotiation.

Trump then appeared to contradict them, telling reporters, "The tariffs give us great power to negotiate. Always have. I used it very well in the first administration, as you saw, but now we're taking it to a whole new level."

Stocks suffered a global meltdown, as analysts warned the tariffs could upend global supply chains and hurt corporate profits.

The Dow fell nearly four per cent, its biggest one-day percentage loss since June 2020. The S&P 500 lost nearly five per cent and the tech-heavy Nasdaq declined nearly 6 per cent, its worst day in percentage terms since the pandemic era of March 2020.

American companies with significant overseas production took a hit. Nike shares lost 14 per cent and Apple fell nine per cent.

Trump says the "reciprocal" tariffs are a response to barriers put on US goods, while administration officials said the tariffs would create manufacturing jobs at home and open up export markets abroad, though they cautioned it would take time to see results.

Vice President JD Vance in an interview with Newsmax faulted critics for taking a short-term view.

"That's fundamentally what this is about, the national security of manufacturing and making the things that we need, from steel to pharmaceuticals," Vance said.

Since returning to the White House in January, Trump's on-again, off-again tariff threats have rattled consumer and business confidence. Trump could step back again, as the reciprocal tariffs are not due to take effect until April 9.

"The tariff plan does not appear to be well thought-out. Trade negotiations are a highly technical discipline, and in our view these proposals do not offer a serious basis for negotiations with any country," said James Lucier, founding partner at Capital Alpha.

Economists say the tariffs could reignite inflation, raise the risk of a US recession and boost costs for the average US family by thousands of dollars.

Analysts said the tariffs could also alienate allies in Asia and undercut strategic efforts to contain China.

Trump has slapped a 24 per cent tariff on Japan and a 25 per cent tariff on South Korea, both home to major US military bases. He also hit Taiwan with a 32 per cent tariff as the island faces increased military pressure from China.

Canada and Mexico, the largest US trading partners, were not hit with targeted tariffs on Wednesday, but they already face 25 per cent tariffs on many goods and now face a separate set of tariffs on auto imports.

Source: Reuters