“Tomorrow — tariffs 25% on Canada and 25% on Mexico. And that’ll start,” Trump told reporters in the Roosevelt Room. “They’re going to have to have a tariff.”

Trump has said the tariffs are to force the two U.S. neighbors to step up their fight against fentanyl trafficking and stop illegal immigration. But Trump has also indicated that he wants to even the trade imbalance with both countries as well and push more factories to relocate in the United States.

His comments quickly rattled the U.S. stock market, with the S&P 500 index down 2% in Monday afternoon trading. It’s a sign of the political and economic risks that Trump feels compelled to take, given the possibility of higher inflation and the possible demise of a decades-long trade partnership with Mexico and Canada.

Yet the Trump administration remains confident that tariffs are the best choice to boost U.S. manufacturing and attract foreign investment. Before Trump’s statement on tariffs in response to a question on Tuesday, Commerce Secretary Howard Lutnick said that the c omputer chipmaker TSMC had expanded its investment in the United States because of the possibility of separate 25% tariffs.

Trump provided a one-month delay in February as both Mexico and Canada promised concessions. But Trump said Monday that there was “no room left for Mexico or for Canada” to avoid the steep new tariffs, which were also set to tax Canadian energy products such as oil and electricity at a lower 10% rate.

“If Trump is imposing tariffs, we are ready,” said Canadian Foreign Minister Mélanie Joly. “We are ready with $155 billion worth of tariffs and we’re ready with the first tranche of tariffs, which is $30 billion.”

Joly said Canada has a very strong border plan and explained that to Trump administration officials last week. She said the diplomatic efforts are continuing. She spoke after Trump made his comments Tuesday.