Donald Trump is set to speak to the leaders of Canada and Mexico later but warned them against retaliating to his tariffs, saying: “We can play the game all they want.”

The US leader has announced that he is imposing 25% tariffs on imports from Canada and Mexico.

The two countries then hit back with retaliatory tariffs.

However, the US president returned to Washington from Mar-a-Lago on Sunday night and brushed aside the reprisals.

“I love the people of Canada. I disagree with the leadership of Canada. And something’s gonna happen there.

“If they want to play the game, I don’t mind. We can play the game all they want.”

Mr Trump also threatened to impose steeper tariffs elsewhere, telling reporters import taxes will “definitely happen” with the European Union.

When asked about potential tariffs on the UK, Mr Trump told reporters “we’ll see what happens”.

He said the UK “is out of line” on trade with US, but was confident the situation “can be worked out” without tariffs.

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Later on he posted on his Truth Social platform: “Anybody that’s against Tariffs, including the Fake News Wall Street Journal, and Hedge Funds, is only against them because these people or entities are controlled by China, or other foreign or domestic companies.

“Anybody that loves and believes in the United States of America is in favor of Tariffs. They should have never ended, in favor of the Income Tax System, in 1913. The response to Tariffs has been FANTASTIC!”

The Trump administration had said the tariffs are aimed at stopping the spread and manufacturing of the opioid fentanyl, as well as pressuring America’s neighbours to limit illegal immigration to the US.

But it risks a trade war and higher prices for American consumers.

Shares on Asian markets tumbled in early trade on Monday and US equity futures pointed sharply lower in the wake of Mr Trump’s imposition of tariffs.

Japan’s Nikkei opened down 2% this morning, with large falls also reported on Taiwan and South Korea’s indices.

“Trump’s trade war has started,” said Alvin Tan, head of Asia currency strategy at RBC Capital Markets in Singapore.

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Earlier on Sunday, Mr Trump said any potential pain caused by the trade war would be worth it.

“Will there be some pain? Yes, maybe (and maybe not!). It will all be worth the price that must be paid.”

Meanwhile, Canada’s high commissioner to the UK Ralph Goodale, speaking to Sky News’ Kamali Melbourne, had a warning for allies.

He said: “I would just say to our allies around the world watch this closely, you could be next, and in the meantime, stand by your friends.”

He added Mr Trump’s words were a “salesman’s pitch” and despite the historically close relationship between the countries “we don’t want to be each other”.

Canada and Mexico have hit back with retaliatory tariffs on President Donald Trump’s steep tax on goods imported from its neighbours.

Canadian prime minister Justin Trudeau and Mexico’s president Claudia Sheinbaum both announced the counter-tariffs on Saturday night.

Mr Trudeau said Canada would impose 25% tariffs on C$155bn (£85.9bn) of US goods in response to Mr Trump‘s 25% tariffs.

Duties on C$30bn (£16.6bn) in trade in American alcohol and fruit will take effect on Tuesday, when the US tariffs are set to start. The remaining C$125bn (£69.3bn) would take effect in 21 days.

Mr Trudeau opened his speech with a passionate message aimed at American consumers.

“It will have real consequences for you, the American people,” he said, saying it would result in higher prices on groceries and other goods.

The outgoing prime minister channelled the views of many Canadians who feel betrayed by their neighbour and longtime ally, reminding Americans that Canadian troops fought alongside them in Afghanistan and helped them respond to domestic crises including the wildfires in California and Hurricane Katrina.

“The actions taken by the White House split us apart instead of bringing us together,” Mr Trudeau said. He also encouraged Canadians to “choose Canadian products and services rather than American ones”.

Meanwhile, Ms Sheinbaum said in a post on X that she had ordered her economic minister to implement tariff and non-tariff measures to defend Mexico’s interests.

“We categorically reject the White House’s slander that the Mexican government has alliances with criminal organisations, as well as any intention of meddling in our territory,” Ms Sheinbaum wrote.

“If the United States government and its agencies wanted to address the serious fentanyl consumption in their country, they could fight the sale of drugs on the streets of their major cities, which they don’t do and the laundering of money that this illegal activity generates that has done so much harm to its population.”

The administration had said that the tariffs aimed to stop the spread and manufacturing of the opioid fentanyl, as well as pressuring America’s neighbours to limit illegal immigration to the US.

Earlier in the day, President Donald Trump signed an order imposing steep tariffs on imports from Canada, Mexico and China, risking a trade war and increased prices for American consumers.

Mr Trump declared an economic emergency in order to place duties of 25% on goods from Mexico and Canada, and 10% on all imports from China.

But energy imported from Canada, including oil, natural gas and electricity, would be taxed at a rate of 10%.

China did not immediately respond to Mr Trump’s action.

The tariffs also include a mechanism to escalate the rates if the countries retaliate.

Mexico and Canada are two of America’s largest trading partners, with the tariffs upending decades-old trade relationships.

Mr Trump said on social media that the tariffs – a longstanding campaign promise – were necessary “to protect Americans”.

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But the taxes may throw the global economy into turmoil, and significantly worsen inflation in the US – which has already increased the prices of groceries, fuel, housing, cars and other goods.

A new analysis by the Budget Lab at Yale University found that the average US household would lose the equivalent of $1,170 (£944) in income from the tariffs. The research also found that economic growth would slow and inflation would worsen – especially if Canada, Mexico and China retaliate.

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“It doesn’t make much economic sense,” said William Reinsch, senior adviser at the Centre for Strategic and International Studies and a former US trade official.

“Historically, most of our tariffs on raw materials have been low because we want to get cheaper materials so our manufacturers will be competitive… Now, what’s he talking about? He’s talking about tariffs on raw materials. I don’t get the economics of it.”

Mr Trump appears to be preparing more import taxes.

On Friday, he suggested imported computer chips, steel, oil and natural gas, as well as copper, pharmaceutical drugs and imports from the European Union may be subject to tariffs, which could pit the US against much of the global economy.

Israel has welcomed the release of more hostages who have been held in Gaza since the beginning of the war.

Ofer Kalderon and Yarden Bibas were the first two released into the custody of the Red Cross in Khan Younis this morning and later handed over to Israeli forces.

They were seen standing on a stage and waving.

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American-Israeli Keith Samuel Siegel was released separately, a short time after the first two.

In exchange, 182 Palestinian prisoners, some of whom have been serving life sentences in Israel, will reportedly be freed.

In the ongoing first phase of the ceasefire, Hamas is returning 33 hostages over six weeks. In return, Israel is freeing 737 Palestinian prisoners.

Mr Bibas is the father of the two youngest hostages, baby Kfir, only nine months old when he was kidnapped and Ariel, who was four at the time of the attacks.

Hamas said in November 2023 that the boys and their mother Shiri, who was taken at the same time, were killed in an Israeli airstrike.

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The family of Ofer Kalderon said they are “overwhelmed with joy” after an “unbearable” 484 days waiting for him to be freed.

“Today, we finally embrace Ofer, seeing and truly comprehending that he is here with us.

“We have witnessed how, through extraordinary mental strength, he survived this hell.

“Ofer endured months in a nightmare, and we are proud of his ability to survive and hold onto the hope of embracing his children again.”

In a joint statement, the IDF and Israel’s security agency said: “According to information communicated by the Red Cross, two hostages were transferred to them and are on their way to IDF and ISA forces in the Gaza Strip.”

The IDF added: “The commanders and soldiers of the IDF salute and embrace the returning hostages as they make their way home to Israel.

“The IDF is prepared to receive an additional hostage in the near future.”

The office of Prime Minister Benjamin Netanyahu said: “The government, together with all security agencies, will accompany them and their families.

“The Israeli government is committed to the return of all the kidnapped and missing.”

Today is also expected to see the first Palestinians allowed through the newly reopened Rafah crossing.

The crossing on the Gaza-Egypt border will be opened for 50 injured militants and 50 wounded civilians initially.