President Donald Trump has said 25% US tariffs against Canada and Mexico will go ahead on Tuesday.
The US president threatened to impose the tariffs - which are a tax on imports - on his two neighbours on 4 March, in response to what he says is the unacceptable flow of illegal drugs and undocumented migrants into the US.
"No room left for Mexico or for Canada," Trump said at the White House on Monday. "The tariffs, you know, they're all set. They go into effect tomorrow."
"What they'll have to do is build their car plants, frankly, and other things, in the United States, in which case they have no tariffs," he added.
Markets dropped after Trump confirmed the tariffs on America's two biggest trading partners would be moving forward.
A 10% tariff on Chinese imports is also expected to be implemented after the US accused Beijing of not doing enough to stop the flow of fentanyl into the US.
This means that if brought into effect, Chinese exports to the US will face a levy of at least 20%, following a 10% tariff that took effect a month ago.
All three major indexes were headed to close down more than 2%. The Dow Jones Industrial Average dropped 2%, the S&P 500 sank more than 2% and the Nasdaq fell more than 3%.
Chinese state media claims leaders in Beijing have prepared a series of countermeasures to happen on the same day, raising the prospect of an all-out trade war between the world's top two economies.
China's state-run Global Times newspaper said the countermeasures would probably target US agricultural and food products.
