Global markets kicked off the week on shaky ground as investors reacted to President Trump’s announcement of new tariffs on Mexico, Canada, and China. The move has sparked concerns over a potential trade war, with Japanese and South Korean companies bearing the brunt of the early fallout.

Shares in major Japanese automakers like Toyota, Honda, and Nissan took a nosedive, dropping between 5% and 7% in early trading. These companies have invested heavily in North American supply chains, which could be hit hard by the new taxes. South Korean manufacturers also saw significant declines, as their reliance on trade with the U.S. leaves them vulnerable.

The tariffs—25% on most Canadian and Mexican goods and 10% on Chinese imports—have already prompted strong responses from affected countries. Leaders in Canada and Mexico wasted no time vowing to retaliate with their own tariffs on U.S. products. China, meanwhile, signaled it would challenge the move through the World Trade Organization.

The ripple effects of these tariffs are spreading fast. The U.S. dollar strengthened as the peso and Canadian dollar weakened, while Wall Street braced for a rocky opening as futures pointed to sharp declines. Economists are warning that the tariffs could reignite inflation, a concern that’s already pushing up Treasury yields.

“This uncertainty will only ramp up market volatility and add pressure on businesses,” noted one leading economist.

With markets in China closed for the Lunar New Year, the full impact on the world’s second-largest economy remains to be seen. But one thing is clear: investors are bracing for a bumpy ride as the global trade landscape shifts once again.