US President Donald Trump said on Monday that 25 percent taxes on imports from Mexico and Canada would start on Tuesday, sparking renewed fears of a North American trade war that already showed signs of pushing up inflation and hindering growth.

“Tomorrow - tariffs 25 percent on Canada and 25 percent 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 US neighbours to step up their fight against fentanyl trafficking and stop illegal immigration.

But Trump has also indicated that he wants to eliminate the Americas' trade imbalances as well and push more factories to relocate in the United States.

His comments quickly rattled the US stock market.

Yet the Trump administration remains confident that tariffs are the best choice to boost US manufacturing and attract foreign investment.

Trump provided a one-month delay in February as both Mexico and Canada promised concessions.

But Trump said 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 per cent rate.

“If Trump is imposing tariffs, we are ready," said Canadian Foreign Minister Mélanie Joly.

Joly said Canada had a very strong border plan and explained that to Trump administration officials last week. She said diplomatic efforts were continuing. She spoke after Trump made his comments on Tuesday. (AP)