President Donald Trump said Monday that sweeping tariffs on Canada and Mexico would go into effect today, stating in remarks at the White House there was no chance for a last-minute deal to avert the levies.

“The tariffs, you know, they’re all set,” Trump said. “They go into effect tomorrow.”

Trump has proposed adding a 25% fee on all Mexican and Canadian exports coming across those borders and an additional 10% for Chinese goods, beginning just after midnight Tuesday, saying those countries have not done enough to stem the flow of drugs and migrants into the United States.

The move will increase the levies that the United States charges on foreign goods to levels not seen at least since the 1940s, and is likely to shatter regional supply chains and raise the cost of products ranging from automobiles to breast pumps and vegetables.

Tariffs are expected to further deteriorate the U.S. relationship with its two closest neighbors, whose economies are stitched together across North America. Leaders from Canada and Mexico have been scrambling to persuade Trump to change his mind by devoting more resources to policing the border.

Canada, Mexico and China account for more than 40% of U.S. imports, and economists have said that stiff tariffs could send the Canadian and Mexican economies into a recession.

Trump’s announcement sent stock markets tumbling, with the S&P 500 falling 1.8%, its worst one-day drop so far this year.

“So much for tariffs being just bluster and a bargaining tool,” said Eswar Prasad, a professor of trade policy at Cornell University. “U.S. trading partners are clearly going to face monumental challenges in appeasing Trump and getting him to back off from using tariffs as a broad tool to influence their policies.”

For weeks, Trump has described the tariffs as way to pressure Canada, China and Mexico to crack down on fentanyl and illegal immigration. But on Monday, at an event celebrating a U.S. investment by a Taiwanese chip manufacturer, Trump appeared to change the terms, saying Canada and Mexico needed to relocate auto factories and other manufacturing to the United States.

“What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs,” he said. He added that companies would be “much better off building here, because we have the market. We’re the market where they sell the most.”

Trump had threatened to impose the levies on the three countries beginning Feb. 4. But he decided to pause them on Canada and Mexico for one month after both countries promised measures, like Mexico’s sending more troops to the border and Canada’s appointing a “fentanyl czar.”

Trump did move forward with imposing a 10% tariff on all products from China, which triggered retaliation from that country. He is planning another 10% on all Chinese imports, which would come on top of the 10% to 25% tariffs he imposed on many Chinese products in his first term.

The prospect of new tariffs — in addition to a variety of other proposed levies on steel, aluminum, copper, timber and other products — have elicited anxiety and frustration from businesses selling everything from automobiles to solar panels, who say tariffs will raise their costs as they move goods across borders.

For Canada and Mexico, most trade with the United States has faced zero tariff rates since the 1980s, with free trade agreements for automobiles dating back to the 1960s, said Chad Bown, a senior fellow at the Peterson Institute for International Economics. The sudden imposition of tariffs may also violate the terms of the trade agreement the United States has with Canada and Mexico, signed by Trump. “Increasing tariffs from zero to 25% overnight is likely to be much more disruptive to those now highly integrated North American supply chains than anything President Trump did in his first term,” Bown said.

Canada and Mexico are both deeply dependent on exports to the United States, and Trump’s threats have whipped their governments into action. Delegations of officials have made trips to Washington in recent weeks, including to meet with Howard Lutnick, the commerce secretary.

Mexico had adopted a strategy of seeking to appease Trump on several fronts at once: taking action against fentanyl-producing cartels, curbing migration and limiting China’s economic sway. The Mexican government has unleashed a crackdown on criminal groups which manufacture fentanyl. In recent days, Mexican authorities handed over dozens of top cartel operatives to the United States and disclosed that they are accepting intelligence from CIA drone flights to hunt down others.

Seizures of the synthetic opioid have been taking place almost on a regular basis in recent weeks, including the seizure last week of 6 kilos of fentanyl at Mexico City’s new international airport, in a package bound for New Jersey.

Mexico also pledged to deploy 10,000 National Guard troops to help deter migration, building on earlier efforts to disassemble migrant caravans well before they reach the border with the United States.

The border was already exceptionally quiet when Trump took office in January. Mexico detained about 475,000 migrants in the last quarter of 2024, according to government figures, more than double the amount detained in the first nine months of the year.

But in recent weeks, border crossings have declined to once unthinkable levels, reflecting the Trump administration’s new policies aimed at restricting migration and Mexico’s own deterrence efforts. At one point in February, U.S. personnel on the Mexican border encountered only 200 migrants in a single day, the lowest such figure in recent history.

In Canada, the threat of tariffs has galvanized Prime Minister Justin Trudeau’s government, provincial politicians and businesses, and prompted a surge of patriotism and anti-American sentiment.

The Canadian government swiftly put together a plan to increase security at its border. While some of it involved repackaging programs that were previously announced, it included some flashy items such as leasing Black Hawk helicopters for Royal Canadian Mounted Police Patrols and buying a fleet of drones.

Because U.S. government statistics clearly show that Canada is not a significant route into the U.S. for drugs or migrants, Canadian officials have been able to claim success with their crackdown.