US tariffs on Mexico to be paused for a month: Trump

US President Donald Trump says he will pause new tariffs on Mexico for one month after Mexico agreed to reinforce its northern border with 10,000 National Guard members to stem the flow of illegal drugs, particularly fentanyl.

Mexican President Claudia Sheinbaum said the agreement also includes a US commitment to act to prevent trafficking of high-powered weapons to Mexico.

The two leaders spoke by phone on Monday, just hours before US tariffs on Mexico, China and Canada were set to take effect.

Mexico and the US will use the month-long pause to engage in further negotiations, Trump said.

US stocks and other global financial markets slumped on the looming tariffs while world leaders responded to Trump's threats to expand tariffs to the European Union as well.

Trump said on Monday he had spoken with Canadian Prime Minister Justin Trudeau and would do so again at 3pm ET (7am AEDT on Tuesday).

Both Canada and Mexico had announced retaliatory tariffs of their own.

The tariffs on Canada and China remain poised to take effect on Tuesday.

A White House advisor earlier on Monday said the administration had noticed that Mexico was "serious" about Trump's executive order on tariffs but Canada has "misunderstood" it.

"The good news is that in our conversations over the weekend, one of the things we've noticed is that Mexicans are very, very serious about doing what President Trump said," White House National Economic Council Director Kevin Hassett said on CNBC.

"Canadians appear to have misunderstood the plain language of the executive order," Hassett added.

"President Trump was absolutely 100 per cent clear that this is not a trade war, this is a drug war."

When asked what Canada and Mexico must do to lift their tariffs, Trump told reporters on Sunday they "have to balance out their trade, number one".

"They've got to stop people from pouring into our country ... they have to stop people pouring in, and we have to stop fentanyl. And that includes China," Trump said.

Speaking in Washington DC on Sunday, Trump indicated that the 27-member European Union would be next in the firing line but did not say when.

"They don't take our cars, they don't take our farm products. They take almost nothing and we take everything from them," he told reporters.

EU leaders meeting at an informal summit in Brussels on Monday said Europe would be prepared to fight back if the US imposes tariffs but also called for reason and negotiation.

EU foreign policy chief Kaja Kallas said if the US and Europe started a trade war "then the one laughing on the side is China".

Economists said the plan to impose 25 per cent tariffs on Canada and Mexico and 10 per cent tariffs on China would slow global growth and drive prices higher for people in the US.

Trump says they are needed to curb immigration and narcotics trafficking and spur domestic industries.

Trump's tariffs would cover almost half of all US imports and would require the United States to more than double its own manufacturing output to cover the gap - an unfeasible task in the near term, ING analysts wrote.