Canada strikes back with retaliatory tariffs as fears grow that Trump's trade war will causes prices to rocket

Canada will retaliate against President Donald Trump's new tariffs with 25 percent levies on a raft of U.S. imports, Prime Minister Justin Trudeau said on Saturday, warning Americans that Trump's actions would have real consequences for them.

As relations between the long-time allies who share the world's longest land border reach a new low, Trudeau told a news conference he was slapping tariffs on $107 billion of U.S. goods.

The tariff's will take effect on Tuesday, the same day as Trump's tariffs with see 25 percent on goods from Mexico and Canada and 10 per cent on Chinese products.

The tariff's have the potential which could disrupt more than $2.1 trillion (£1.69 trillion) in annual trade between those nations and America. 

Trudeau's announcement came just hours after Trump ordered 25 percent tariffs on Canadian and Mexican imports and 10 percent on goods from China, risking a trade war that economists say could slow global growth and reignite inflation.

Trump said he would impose 10 percent tariff on all energy imports from Canada.

The Canadian leader said tariffs would include American beer, wine and bourbon, as well as fruits and fruit juices, including orange juice from Trump's home state of Florida. 

Canada would also target goods including clothing, sports equipment and household appliances.

Trudeau said the coming weeks would be difficult for Canadians but that Americans would also suffer from Trump's actions.

'Tariffs against Canada will put your jobs at risk, potentially shutting down American auto assembly plants and other manufacturing facilities,' Trudeau said, addressing U.S. citizens during a press conference in Ottawa.

'They will raise costs for you, including food at the grocery store and gas at the pump.'

On Friday Mr Trump told reporters he would impose U.S. tariffs as 'punishment' on three of the US's largest trade partners for allowing drugs and migrants to flood into the US.

The levies – on products such as computer chips, steel, oil, gas and cars – 'will bring a tremendous amount of money in for our country and bring a rebirth in American manufacturing', he said. 

Canada is America's biggest foreign supplier of crude oil, followed by Mexico.

Mark Carney, frontrunner to replace Justin Trudeau as Canada's prime minister, has vowed that his country will hit back.

The former governor of the Bank of England said: 'President Trump probably thinks Canada will cave in. But we are going to stand up to a bully, we're not going to back down. We're united and we will retaliate.'

Mr Trump put tariffs at the centre of his election campaign, citing an era more than a century ago when tariffs were a cornerstone of US trade policy and revenue.

He said: 'It was a beautiful time. I love big, bold beautiful tariffs. They protect American businesses and encourage Americans to buy homegrown goods. I will use them as a way to punish those who continue to allow our country to be flooded with killer drugs like fentanyl and those who allow illegal aliens to pour over our borders.'

Mr Trump has warned he will impose future tariffs on the European Union as punishment for its 'horrible treatment of America' but has yet to mention the UK in any of his plans.

Sir Keir Starmer has said he is anxious to secure a trade deal with the US and sources in Washington tell the MoS that 'talks are ongoing about Sir Keir coming to the White House for in-person talks'.

Mr Trump's tariffs threaten to disrupt the $1.6 trillion trade between Canada and Mexico and the US each year.

Professor David Ortega, an economist at Michigan State University, said they could end up punishing American consumers by driving up prices.

He said: 'Tariffs drive up the cost of goods domestically by increasing production costs and reducing competition. The higher costs get passed on to consumers with low-income households bearing the brunt of the burden.'

China, Canada and Mexico have all threatened to retaliate against the measures. Canadian officials have outlined plans to impose higher taxes on orange juice from Florida and electric cars made by Tesla, a company owned by Mr Trump's 'First Buddy', Elon Musk.

Mr Trump put tariffs on Chinese imports during his first term in office and ended up bailing out US farmers who saw export revenues plunge by $10 billion after China retaliated.

On Monday the President insisted his tariffs would be a useful 'bargaining tool' with other governments.

'We have the biggest piggy bank, we can't lose,' he said.