Experts say a volley of tariffs between the U.S. and Canada could tip both countries into a recession and severely disrupt cross-border commerce between the key trading partners.

A Canadian government official said Wednesday it is exploring potential retaliatory levies on certain U.S. imports after President-elect Donald Trump on Monday threatened to impose a 25% tariff on all goods from Canada and Mexico on his first day in office. The official, who stressed no final decision has been taken, spoke on condition of anonymity as they were not authorized to speak publicly.

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Mexican President Claudia Sheinbaum earlier this week also hinted that the country could retaliate against the U.S. with its own tariffs on American products. Trump said the stepped-up duties are necessary to curb the flow of undocumented immigrants and illicit drugs from Mexico and Canada.

“Blanket 25% tariffs on Canada threatened by U.S. President-elect Donald Trump earlier this week would push Canada into a recession in 2025, cause a sharp spike in inflation and force the Bank of Canada to hold rates higher next year,” economist Michael Davenport of Oxford Economics said in a report Thursday.