US President Donald Trump has agreed to postpone tariffs on Mexican goods for one month following an agreement with Mexico to strengthen border security.
Mexican President Claudia Sheinbaum announced the development on Monday, stating that the decision came after a conversation with Trump.
As part of the agreement, Mexico will deploy 10,000 National Guard troops along its northern border to curb drug trafficking, particularly the flow of fentanyl into the United States.
“We had a good conversation with President Trump, conducted with great respect for our relationship and sovereignty,” Sheinbaum wrote on social media.
“We reached a series of agreements.”
Sostuvimos una buena conversación con el presidente Trump con mucho respeto a nuestra relación y la soberanía; llegamos a una serie de acuerdos:
1.México reforzará la frontera norte con 10 mil elementos de la Guardia Nacional de forma inmediata, para evitar el tráfico de drogas…
Sheinbaum also noted that the US has pledged to take action against the smuggling of high-powered weapons into Mexico, a longstanding issue contributing to violence in the region.
The agreement marks a temporary pause in escalating trade tensions between the two nations.
Trump had previously announced tariffs on Mexican imports as part of his administration’s strategy to push Mexico to take stronger measures against illegal border crossings and drug trafficking.
US stocks begin to recover
US stocks, which had experienced sharp declines earlier in the week due to fears of escalating trade tensions, began to recover after President Donald Trump’s announcement that tariffs on Mexico would be delayed for one month.
The benchmark S&P 500 index was down 0.6% around midday, but this was a significant improvement from the morning’s losses.
The announcement also provided some relief for Mexico’s peso, which had been under pressure due to fears of a trade war.
Trump’s decision to delay tariffs on Mexico followed productive discussions with Mexican President Claudia Sheinbaum.
The tariffs, which had been set to take effect Tuesday morning, were aimed at addressing issues such as immigration and fentanyl trafficking.
However, the delay gave markets a temporary break from the uncertainty that had been building in response to Trump’s aggressive tariff plans.
Meanwhile, Canadian officials remained less optimistic about the possibility of a similar reprieve.
Following talks with Canadian Prime Minister Justin Trudeau, Trump confirmed that tariffs on Canada and China were still set to begin on Tuesday.
Canada, in response, has announced retaliatory tariffs on U.S. goods, signaling a growing trade rift between the two nations.
The European Union (EU) also remains on edge, with Trump hinting that the EU could be the next target for tariffs, though he did not specify a timeline.
During a press conference on Sunday, Trump criticized Europe for its trade practices, especially about cars and farm products.
The EU has expressed its readiness to retaliate if the US proceeds with tariffs, though EU leaders, including Germany’s Chancellor Olaf Scholz, have stressed the importance of finding a diplomatic solution to avoid a full-blown trade war.
Despite this uncertainty, Trump indicated that the UK, no longer a member of the EU, might be spared from tariffs, which could ease trade tensions with one of the US’s closest allies.
The US is the EU’s largest trade partner, though the US has a significant trade deficit with the bloc.
Asian and European markets
Market reactions on Monday reflected concerns over the broader economic implications of a trade war.
In Asia, stocks in Tokyo dropped nearly 3%, while Australian shares, often seen as a barometer for Chinese market performance, fell 1.8%.
The European markets also saw declines, with Germany’s DAX index down 1.5%, France’s CAC down 1.31%, and the UK’s FTSE 100 dropping 1.15%.
Currency markets were also affected, with the Chinese yuan, Canadian dollar, and Mexican peso all falling against the US dollar.
Oil prices rose sharply, particularly US crude oil, as both Canada and Mexico are major suppliers of crude to the US Gasoline futures surged nearly 3% in early trading.
Economists have raised alarms about the potential economic fallout from the tariffs, predicting that Canada and Mexico could enter recessions, while the US could experience inflationary pressures.
In Europe, Deutsche Bank economists have projected that a 10% tariff on the EU could reduce GDP by 0.5%.
These tariff-related risks underscore the broader concern that the global economy could face slow growth and higher inflation as a result of rising trade barriers.
Automakers, in particular, could suffer from the new tariffs.
US companies like Ford and General Motors saw their stock prices drop by 4-5%, as tariffs on vehicles built in Mexico and Canada could disrupt the intricate supply chains that stretch across North America.
European automakers such as Volkswagen, BMW, and Daimler Truck also saw significant losses in early trading.
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