By David Goldman, CNN

(CNN) — Just about everyone thought it was a bluff. Top analysts from the biggest banks on Wall Street said it was highly unlikely. Stocks were trading like it wouldn’t happen. Some companies built contingency plans, but they weren’t exactly rushing to make changes.

And maybe it was, after all. US President Donald Trump and Mexico President Claudia Sheinbaum on Monday announced a deal to delay tariffs by a month after Mexico agreed to place 10,000 soldiers at the border.

That sent stocks on the verge of a comeback after they initially tumbled Monday. The Dow was down by around 130 points, or 0.3%, after tumbling nearly 600 points at the opening bell. The S&P 500 sank 0.7% and the Nasdaq Composite was 1% lower — both well off their lows.

Bitcoin and other cryptocurrencies also reversed course and were broadly higher mid-morning.

Auto industry stocks, which had been particularly hard hit because virtually all American-made cars are manufactured at least in some part in Mexico or Canada, rebounded. GM (GM) was down less than 2% after falling more than 7% earlier in the day, Jeep and Chrysler maker Stellantis (STLA) was down 3% and Ford (F) fell more than 1% — well off their lows.

But, globally, stocks crumbled. Major European indexes were down across the board, and Asian markets closed sharply lower. The US dollar rose sharply.

Energy costs surged, largely because of Canadian tariffs, which still appear to be set to go into effect Tuesday: US crude oil rose 3% and natural gas spiked 8%. Despite a lower 10% tariff on Canadian electricity, natural gas and oil exports to the United States, the energy industry said it will not be able to quickly or easily find alternate sources. Diesel and jet fuel costs in particular will rise, according to Angie Gildea, the US energy sector lead at accounting firm KPMG.

“Any infrastructure upgrades would not happen overnight,” Gildea told CNN. “Tariffs on Canadian oil would increase costs for US refiners, leading to price hikes for consumers.”

Near-term bond rates rose, because tariffs can cause inflation. But longer-term bond rates fell, because tariffs can weaken economic growth.

A risky bet

But other tariffs are coming — in full force. Trump announced Saturday that a massive 25% tariff on most imports from Canada that are still expected to go into effect Tuesday. An additional 10% tariff on Chinese goods will be enacted the same day.

Trump in a message posted on Truth Social Sunday said, “We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use.” But America’s supply chains are reliant on its trading partners, and even for goods that could be grown or produced exclusively in the United States, the complex web of interconnected global trade cannot easily be unwound.

So the additional costs on foreign-made goods will be paid by American importers, who typically pass those costs onto retailers, who pass them onto inflation-weary consumers. That means prices will rise — although, for most items, not immediately. Businesses’ profits will be squeezed as they bear the cost burden of the tariffs or pay to adjust their carefully constructed and at times inflexible supply chains.

Trump’s tariffs are a major gamble. Although proponents like JPMorgan Chase CEO Jamie Dimon have said tariffs could be worth a small rise in inflation if they aid in America’s national security, critics note that inflation is on the rise again, the stock market is due for a selloff and tariffs could inflict serious damage to a US economy that has been humming — let alone to the China, Canada and Mexico’s economies, which could plunge into a recession if tariffs are put in place.

That’s because the scope of the tariffs Trump set in motion Saturday was enormous: $1.4 trillion of imported goods, which is more than triple the $380 billion worth of foreign goods that were hit with tariffs during Trump’ first term, according to estimates from the Tax Foundation. Although advocates note Trump’s first-term tariffs did not meaningfully raise inflation, they were far narrower in scope than what Trump is putting in place Tuesday. And the pandemic that follow skewed some of the inflationary aspects of the tariffs — many of which remained in place during the Biden administration.

New research from the Peterson Institute for International Economics suggests Trump’s aggressive tariff campaign will force American consumers to pay more for practically everything — from foreign-made sneakers and toys to avocados. The Tax Foundation on Sunday said Trump’s tariffs would raise taxes by an average of $830 per US household in 2025.

They have also already kicked off a trade war. Canada ordered retaliatory tariffs, and China said it would “take necessary countermeasures.” Because Trump’s executive order that put tariffs into motion includes a retaliation clause, America could launch even steeper tariffs, which could raise costs even further. Trump has also pledged another round of tariffs on February 18, perhaps on other countries.

Business uncertainty

The corporate reaction was swift and fierce, as Trade Partnership Worldwide predicted the tariffs would add $700 million a day to US companies’ tax burdens. Massive business groups, including the powerful Chamber of Commerce, the National Association of Manufacturers and several energy trade groups lambasted the tariffs.

The agriculture industry is already asking for subsidies: The Western Growers Association, which represents farmers, noted they’ve been retaliated against before in trade wars and asked the Trump administration to offset the costs of the tariffs with government funds.

The good news for consumers is that not much will change in the very near term — companies were stockpiling goods to get ahead of potential tariffs, so those inventories will clear out first before the more expensive ones come in. But, eventually costs will probably start to go up — a fact that even Trump acknowledged could happen as supply chains get disrupted.

That may be why Goldman Sachs on Sunday predicted the tariffs would be short-lived, although analysts noted “the outlook is unclear.”

Still, advocates believe tariffs will pose a long-term benefit. Trump’s nominee for Commerce Secretary, Howard Lutnick, said last week at his confirmation hearing that America has relied on trade partners for far too long — and it was time for America to make its own stuff again.

“If Canada is going to rely on America for its economic growth, how about you treat our farmers, our ranchers and our fishermen with respect?” he said. “And so I think the president and our Trump administration is focused on improving the lives of our producers.”

In the end, Lutnick argued tariffs mean “the economy of the United States will be much, much better.”

The jury’s still out. But the experiment appears to be on. We’ll find out soon enough.