Following an agreement between Mexico and the US, President Donald Trump agreed to delay tariffs on Mexican products for a month.
The Mexican president Claudia Sheinbaum made the announcement on Monday. She said that it was the result of a discussion with Trump.
In order to combat drug trafficking and fentanyl entering the United States, Mexico has agreed to deploy 10,000 National Guard soldiers along its border with the United States.
Sheinbaum posted on Facebook: “We had an excellent conversation with President Trump. We conducted it with respect and consideration for our relationship with him, as well as his sovereignty.”
We reached several agreements.
Sostuvimos una buena conversacion con el presidente Trump con mucho respeto a nuestra relacion y la soberania; llegamos a una serie de acuerdos: 1.Mexico reforzara la frontera norte con 10 mil elementos de la Guardia Nacional de forma inmediata, para evitar el trafico de drogas…
Sheinbaum noted also that the US had pledged to act against the smuggling high-powered guns into Mexico. This has been a problem for many years, contributing to the violence in this region.
This agreement represents a temporary stop to the escalating tensions in trade between both nations.
Trump announced tariffs against Mexican imports in the past as a part of its strategy to encourage Mexico to strengthen measures to combat illegal border crossings, drug trafficking and other crimes.
Stocks in the US begin to recover
After President Donald Trump announced that the tariffs against Mexico will be postponed for one month, US stocks began to rebound. They had suffered sharp losses earlier in this week on fears of an escalation in trade tensions.
Around midday the benchmark S&P 500 was down by 0.6%, but that was an improvement over morning losses.
This announcement was also a relief to the peso of Mexico, which has been under stress due to concerns about a possible trade war.
Trump delayed tariffs against Mexico after productive talks with Mexican President Claudia Sheinbaum.
Tariffs were set to go into effect on Tuesday, aiming at issues like immigration and drug trafficking.
The delay provided a brief respite from the growing uncertainty in the markets as a result of Trump’s aggressive plans for tariffs.
Canadian officials, meanwhile, remained less hopeful about the prospect of receiving a similar reprieve.
After talks with Justin Trudeau (Canadian Prime Minister), Trump confirmed the tariffs against Canada and China would still begin on Tuesday.
Canada has responded by imposing retaliatory duties on U.S. products, signaling an increasing trade gap between the two countries.
Trump hinted that tariffs could target the European Union, but he didn’t specify when.
Trump criticised Europe’s trade practices at a Sunday press conference, focusing on cars and agricultural products.
EU leaders have expressed their willingness to respond if US tariffs are implemented, but EU leaders including Germany’s Olaf Scholz stressed that a diplomatic resolution is needed to prevent a trade war.
Trump said that despite this uncertainty the UK might not be subject to tariffs as it is no longer part of the EU. This could help ease tensions between the US and one of its closest allies.
US trade with EU is significant, despite the US’s large trade deficit.
Asian and European Markets
The market’s reaction on Monday was a reflection of concerns about the wider economic impact of a possible trade war.
Stocks in Asia fell by nearly 3%. Australian stocks, which are often viewed as an indicator of Chinese stock performance, dropped 1.8%.
European markets were also down, with the DAX in Germany down by 1.5% and CAC in France down by 1.31%. The FTSE 100 index for Britain dropped 1.15%.
The currency markets also suffered, as the Canadian dollar, the Mexican peso, and the Chinese Yuan all fell against the US Dollar.
The price of oil rose dramatically, especially US crude, since both Canada and Mexico supply a large amount to the US. Futures for gasoline surged by nearly 3% during early trading.
The tariffs could have a negative impact on the economy. Economists are warning that Canada, Mexico, and the US may experience recession.
The economists at Deutsche Bank have estimated that in Europe a tariff of 10% on EU goods could result in a GDP reduction by 0.5%.
The risks associated with tariffs are indicative of the wider concern that trade barriers could lead to a slowdown in global growth, and an increase in inflation.
The new tariffs could be particularly damaging to automakers.
Tariffs imposed on cars built in Mexico or Canada may disrupt supply chains across North America, causing stock prices to drop as much as 4-5% for US-based companies such Ford and General Motors.
Early trading in the European Auto Industry saw losses of up to 20% for Volkswagen, BMW and Daimler Truck.
The ICD published the following article: Trump accepts to delay Mexico tariffs by one month, says President Sheinbaum.
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