Asia’s stock markets took a nosedive on Monday after former US President Donald Trump announced hefty tariffs on imports from Canada, Mexico, and China. The move has stirred worries of a fresh “America First” trade war that could slow down global economic growth.

Tokyo’s Nikkei index dropped over 2% at one point, while Hong Kong’s Hang Seng fell by more than 1%. South Korea’s KOSPI also saw a sharp decline, losing over 2%. Meanwhile, Shanghai’s markets were closed for the Lunar New Year holiday, but traders there are bracing for volatility when trading resumes on Wednesday.

The US dollar hit a record high against the Chinese yuan, underscoring the economic tensions. Analysts predict the dollar’s strength will hold, especially as Trump’s tariffs—ranging from 10% on Chinese goods to 25% on imports from Mexico and Canada—are set to take effect on Tuesday.

These new tariffs, which Trump claims are aimed at curbing migration and fentanyl into the US, have already prompted retaliation. Canada and Mexico announced their own tariffs, and China plans to challenge the move at the World Trade Organization.

Adding fuel to the fire, Trump also threatened new tariffs on the European Union, accusing the bloc of being “really out of line.” He’s scheduled to talk with Canadian Prime Minister Justin Trudeau on Monday, just hours before the US tariffs kick in.

Market watchers are on edge, fearing a domino effect. “The big surprise is how quickly Canada and Mexico retaliated,” one analyst noted. “If China and the EU follow suit, global trade could shrink sharply, hitting economies worldwide.”

As tensions escalate, investors are bracing for more turbulence in the days ahead.