Justin Trudeau has claimed the aim of a “dumb” trade war launched by Donald Trump is to usher in the “complete collapse” of the Canadian economy and make it easier for the United States to annex Canada.

Speaking hours after the US slapped 25% taxes on Canadian and Mexican goods – and a 10% levy on Canadian energy exports – the prime minister announced retaliatory tariffs on US exports and said his country would remain defiant against the aggression.

“We’ve been in tough spots before … but we have not only survived, we have emerged stronger than ever, because when it comes to defending our great nation, there is no price we all aren’t willing to pay, and today is no different,” he said.

Trudeau, who will step down as prime minister after the ruling Liberal party chooses a new leader on Sunday, said the spat between allies is “exactly what our opponents around the world want to see”.

“Today the United States launched a trade war against Canada,” he said. At the same time, the Trump administration is “talking about working positively with Russia, appeasing Vladimir Putin, aligning with a murderous dictator”.

Trudeau also rejected Trump’s repeated taunts that Canada should cede its sovereignty and join the US: “That is never going to happen. We will never be the 51st state.”

Canada’s retaliatory response includes matching tariffs on C$155bn worth of US goods. The first tranche of taxes applies to C$30bn worth of goods and the remaining C$125bn would kick in within 21 days, giving Canadian companies the chance to amend supply chains.

“Americans will lose jobs. Americans will pay more for groceries, for gas, for cars, for homes,” said Trudeau. “As of this morning, markets are down and inflation is set to rise dramatically all across your country.”

Addressing Trump directly, Trudeau said: “Even though you’re a very smart guy, this is a very dumb thing to do.”

Trump has claimed that the tariffs were a response to Canada’s failure to stop fentanyl smuggling into the US, an argument Trudeau called “completely bogus, completely unjustified, completely false”. Although some drugs do cross the border, in both direction, so little fentanyl enters the US from Canada that the US Drug Enforcement Administration (DEA) does not even mention the country in a report from 2020.

Posting on social media, Trump later raised the prospect of further escalation with a warning that any retaliatory levies by Canada would prompt further measures from the US.

Trump’s aggressive tactics have prompted a groundswell of patriotism, uniting provincial leaders across the political spectrum.

Ontario premier Doug Ford, the leader of Canada’s most economically powerful province, said his government will “make sure Americans feel pain”.

Ford, who recently won re-election on a pledge to fight US taxes, says he will impose a 25% export tax on electricity it supplies to three US states if the American tariffs on Canadian goods “persist”.

Ontario also pulled all American spirits and wines from its shelves, barred US companies from bidding on procurement contracts and tore up a deal with Elon Musk’s Starlink company.

Ford said he felt “terrible” about Canada’s response, citing his close relationship with American governors, but said the moves were necessary to send a strong message to the White House.

“The stock market will go downhill faster than the American bobsled team,” he said. “When the market drops, that’s the people speaking. Isn’t this a shame.”

“Every country is very, very aware that if the American government is willing to do this to their own closest neighbour, ally and friend, everyone is vulnerable to a trade war.”

Depending on how long the tariffs persist – and if they increase – the effects on the Canadian economy would be catastrophic.

Quebec premier François Legault warned Tuesday his province could lose up to 160,000 jobs over the next few months.

“We must be able to make Mr Trump pay the price for decisions that do not make sense, even for Americans,” he said in an interview speaking to Radio-Canada.

Tim Houston, the Nova Scotia premier, called ​​Trump a “short-sighted man” who “wields his power just for the sake of it”.

In a statement soon after the tariffs went into effect, Houston said it was “impossible to properly describe the uncertainty and chaos” that the trade war was causing for Canadians.

In neighbouring Newfoundland and Labrador, staff at the province’s liquor stores were ordered to pull all American products.

“Now, more than ever, we should be supporting local and Canadian-made products where possible,” the outgoing premier Andrew Furey said in the release.

Alberta’s rightwing populist premier Danielle Smith, who has previously resisted calls to cut oil exports to the US, called Trump’s action “an unjustifiable economic attack on Canadians and Albertans” and said the move was “both foolish and a failure in every regard”.