Mexico has successfully postponed President Donald Trump’s 25 percent tariff on goods by agreeing to deploy 10,000 troops to the border for a minimum of one month.
Stocks trimmed some losses after the announcement but remained deep in the red.
The S&P 500 dipped about 0.8 percent following Mexico’s update, while the tech-heavy Nasdaq remained down more than 1 percent.
Global stocks had plunged on Monday morning after Trump announced wide-reaching tariffs on Mexico, Canada and China, over the weekend.
Mexican President Claudia Sheinbaum shared with the press on Monday that she had a constructive discussion with Trump. During the conversation, she committed to strengthening Mexico’s northern border by promptly dispatching 10,000 troops to the region.
Trump verified the agreement, describing the phone call as ‘very friendly.’ He further explained that the Mexican soldiers’ primary task will be to prevent the trafficking of fentanyl and illegal immigrants into the United States.
In return the US will work to stem the flow of high-powered weapons into Mexico, Sheinbaum said.
Sheinbaum told Trump that Mexico and the US working together is the best way to compete with China, she told a press conference on Monday.
Trump, pictured at the New York Stock Exchange in December, has announced sweeping tariffs on the US’s largest trading partners and neighbors
Despite the breakthrough with Mexico eleventh-hour negotiations with Canada appear to remain tense.
Trump said he had spoken to Canadian Prime Minister Justin Trudeau early on Monday and the pair are due to speak again at 3pm.
The White House said negotiations with Ottawa were not going well and Trump reiterated that the tariff threats are about trade but also national security.
‘Canada doesn’t even allow U.S. Banks to open or do business there. What’s that all about?’ Trump wrote on his Truth Social platform following the initial call with Trudeau on Monday morning.
‘But it’s also a DRUG WAR, and hundreds of thousands of people have died in the U.S. from drugs pouring through the Borders of Mexico and Canada,’ he added.
Canada is also not optimistic about achieving a similar deal to Mexico, a senior government official told the New York Times.
Canada’s main stock index fell sharply on Monday and the Canadian dollar plunged to a nearly 22-year low earlier in the session.
If the tariffs are implemented in full they could push Mexico and Canada in to recession, Morgan Stanley has warned.
Mexican President Claudia Sheinbaum successfully negotiated a deal for a one-month reprieve
Canada is ‘not optimistic’ it will manage a similar deal to Mexico and is bracing for tariffs
Both Canada and Mexico have promised to retaliate with their own tariffs on US goods if Trump’s measures go into effect.
Trudeau pledged 25 percent tariffs on $106 billion worth of US goods at a press conference on Saturday.
US carmakers, whose supply chains rely on Mexico and Canada, lead Wall Street’s losses in the morning, with General Motors down 5.3 percent, Tesla falling 4.5 percent and Ford down more than 3 percent in the first hour of trading.
Trump has also announced a 10 percent tariff on China, and the country has vowed ‘corresponding countermeasures’ but has not released the details.
Trump said he may raise tariffs higher against countries that bring in retaliatory measures.
The president has said the tariffs are a way to force countries to ‘balance out their trade’, as well as prevent illegal immigration and the flow of drugs into the US.
In order to get tariffs lifted Trump said affected countries must ‘stop people from pouring into our country. They have to stop people from pouring in and we have to stop fentanyl, and that includes China.’
Trump has also threatened the EU with similar measures, and said trade with the UK is ‘out of line’ but a deal ‘can be worked out.’
The Stoxx Europe 600, representing the biggest companies across the continent, was down 1.4 percent in morning trading.
Crypto is also performing badly with around $600bn wipes off its global markets since Saturday, the Financial Times reports.
Asian markets have also been hit by the turbulence with Taiwan, South Korea and Japan seeing their stock markets fall.
Economists have warned that a trade war could push up inflation and threaten growth, the Wall Street Journal reported.
Hedge funds are also making a multi-billion-dollar gamble against the US economy.
Major funds are betting Donald Trump’s presidency will result in a massive market crash that could devastate 401(k)s, pensions, and household savings across America.
Data from Goldman Sachs has sent shockwaves through financial circles, revealing a dramatic surge in ‘short’ positions against US stocks – a move that signals a belief the market is headed for a precipitous crash.
Throughout January, investors placed 10 times more bets on American stocks falling than on their continued rise, a staggering shift that reflects growing unease over Wall Street’s future under Trump’s leadership.
A number of notable Republicans turned on Trump over his tariffs.
Former Republican Senate Leader Mitch McConnell (R-Ky.) told 60 Minutes over the weekend that tariffs ‘will drive the cost of everything up. In other words, it will be paid for by American consumers.’
Even food grown in the US could be hit with price rises as a knock-on effect of tariffs.
It forced GOP Senator Chuck Grassley (R-Iowa) to beg Trump to exempt potash – a key component used in fertilizer.
US farmers get most of their potash from Canada, so end up paying more to feed crops – which would lead to pricier fruit and veg.
