Global stock markets were wiped out by more than $2 trillion US on Thursday as investors reacted to Donald Trump's sweeping new tariffs. Markets were caught off guard by how steep and how broad the tariffs were.

"Markets have voted — this is obviously bad for U.S. and world growth," wrote Derek Holt, vice-president and head of capital markets economics at Scotiabank.

The sell-off highlights a key question at the heart of Trump's trade policy, which he announced Wednesday. The U.S. is placing a 10 per cent minimum tariff on nearly every country, with certain nations receiving a higher so-called "reciprocal" levy, like China, at 34 per cent, the European Union at 20 per cent and Vietnam at 46 per cent.

On one hand, the U.S. president wants to upend 70 years of global trade and fundamentally change the way the world does business. But he's also handing out exemptions meant to shield American businesses, like for the auto industry and Taiwanese semiconductors.

One message embedded in the market sell-off: Trump can't have it both ways.

WATCH | How Trump declared a tariff war on the world: 

'Liberation Day': How Trump declared a tariff war on the world

Trump announced sweeping 'reciprocal' tariffs on dozens of countries. Who has — and hasn't — been hit? Then, Trump says Canada has been ripping off the United States, imposing steep tariffs on imported American dairy products. Is he right?

"The U.S. can't have its cake and eat it, too," says Karl Schamotta, chief market strategist at the financial services firm Corpay.

Schamotta says the U.S. built the global trade system over the past 70 years and has been its primary beneficiary.

"If you overturn that world order, you're going to pay the cost," he says. 

"The question is whether [Trump] will have the stomach to stick with it and withstand the political pressure and negative consequences that will come with [this policy]."

Automakers pause production

Stock markets aren't the only ones showing signs of pain.

Hours after the tariff announcement, Stellantis, owner of the Jeep and Ram brands, paused production at some plants in Canada and Mexico. That was widely expected, as Trump's separate 25 per cent vehicle tariff would apply to any non-American parts used in vehicles made outside the U.S.

WATCH | Stellantis idles plant in Windsor, Ont., for 2 weeks: 

Stellantis idles plant in Windsor, Ont., for 2 weeks because of U.S. tariffs

Automaker Stellantis has confirmed it's shutting down its assembly plant in Windsor, Ont., for two weeks, largely because of U.S. tariffs on imported vehicles. Unifor Local 444 estimates roughly 4,500 people work in various jobs and trades at the factory.

But shutting down production at those plants will have a knock-on effect on American production. For Stellantis, the pause will impact some of its U.S. powertrain and stamping facilities that support those factories, it said. 

That will lead to the layoffs of American workers.

The pause impacts roughly 3,200 people in Canada and about 900 in the U.S., Stellantis said in a statement to CBC News.

WATCH | Canada slaps matching 25% tariff on U.S.-made vehicles: 

Canada slaps matching 25% tariff on U.S.-made vehicles

Canada is retaliating against U.S. President Donald Trump’s trade policy with a 25 per cent tariff on vehicles imported from the U.S. that are not compliant with the Canada-U.S.-Mexico Agreement. Prime Minister Mark Carney said Trump's tariff plan means the global economy 'is fundamentally different today than it was yesterday.'

So, investors are losing their shirts. American workers are being laid off and the tariffs haven't even been fully imposed yet. Meanwhile, Canada has enacted a matching 25 per cent tariff on U.S.-made vehicles.

BMO senior economist Sal Guatieri says we have no way of knowing how much worse things will get.

"The big question now is: How aggressively do other countries retaliate and will the president then follow through with threatened countermeasures, dramatically escalating the trade war and raising the risk of a global and U.S. recession?" wrote Guatieri.

Textiles, food most exposed to tariffs

Tariffs are a tax on American businesses. The Budget Lab at Yale University crunched the numbers and found Wednesday's announcement has pushed the average effective tariff rate in the U.S. to 22.5 per cent, the highest since 1909.

The Budget Lab's economics director, Ernie Tedeschi, says the new tariffs will drive up prices by 1.3 per cent. That means each household's purchasing power will go down $2,100 annually in 2024 dollars on average, he wrote in a social media post. All of this year's tariffs will raise prices by 2.3 per cent, he said, amounting to an average loss of $3,800.

WATCH | 'We did not anticipate such high tariffs,' Vietnamese textile official says: 

'We did not anticipate such high tariffs,' Vietnamese textile official says

Tran Nhu Tung, chair of a Thanh Cong textile investment group, says the U.S. tariff impact could mean more business for countries like Canada to make up for lost American orders.

The Budget Lab found the products most exposed to Trump's taxes to date are textiles and apparel. It says prices for textiles will rise by as much as 17 per cent when all tariffs announced so far are fully implemented.

Food will be disproportionately hit, as well, rising 2.8 per cent from all levies.

This from a president who was elected in no small part by voters who were worried about the rising cost of living.

Trump's commerce secretary, Howard Lutnick, did the rounds on financial news channels as markets sold off on Thursday. Bloomberg Surveillance host Jonathan Ferro asked the question that overshadows the whole trade policy: "How much pain are you willing to tolerate? How much market pain are you willing to tolerate?"

Lutnick, a successful investment tycoon who is a longstanding friend of the president, has faced criticism as one of the voices in the administration pushing for higher, tougher tariffs, no matter the cost.

WATCH | Trump tariffs divide many Americans: 

Trump tariffs divide many Americans

Support or frustration over U.S. President Donald Trump’s tariffs on Canada have divided politicians along party lines and left consumers caught in the middle.

"What's going to happen is people are going to realize it is the great American economy that is the winner here. And anyone who doubts it and anyone who shorts Donald Trump, or anyone who doubts the strength and power of the American economy, is making a foolish bet," said Lutnick.

However, he went on to say, these tariffs will mean difficulties for anyone who buys much of anything made outside the U.S.

"Sure, importers are going to have a tough time figuring out what to do because they went and found the cheapest production in the world. It's time to bring that production home."

In other words, he wants American companies who make things using cheap labour to repatriate that production to the U.S., where they would have to pay employees more. Which would drive up the price for American consumers.

The question in the weeks and months ahead is whether the administration will stick to its guns and push for that repatriation, regardless of the price it will pay as consumers keep seeing stocks tank and prices rise.