Financial markets bounced back on Monday after former President Donald Trump announced a suspension of tariffs on Mexico.
The stock market, which had been in turmoil, surged following news that Mexico agreed to deploy 10,000 troops to its northern border to curb illegal migration and fentanyl smuggling.
Trump Convinces Mexico to Bolster Border Security
Over the weekend, Trump successfully negotiated a deal with Mexican President Claudia Sheinbaum to delay the 25% tariffs that were set to take effect.
As part of the agreement, Mexico committed to immediate action in strengthening border enforcement.
Investors reacted positively to the news, with the S&P 500 reversing its earlier losses, rising 0.7%, while the Nasdaq gained more than 1%.
The move eased concerns about economic disruptions, particularly for industries reliant on cross-border trade.
Mexico’s Commitment to Reinforcing Border Control
Sheinbaum described her conversation with Trump as productive, confirming that Mexico would send 10,000 troops to reinforce its northern border.
Trump, in turn, called the discussion “very friendly” and emphasized that Mexico’s commitment would play a key role in stopping illegal immigration and drug trafficking.
In exchange, the U.S. agreed to curb the illegal flow of high-powered weapons into Mexico, addressing a long-standing concern of the Mexican government.
Canada Remains Engaged in Negotiations
Meanwhile, Canadian Prime Minister Justin Trudeau continues discussions with Trump, with another call scheduled for 3 p.m. as both nations work to prevent potential trade disruptions.
Trudeau previously warned of retaliatory tariffs should the U.S. impose duties on Canadian goods.
Auto Industry Breathes a Sigh of Relief
With tariffs on hold, automakers saw a sharp turnaround.
General Motors, which had been down 5.3%, regained some ground, while Tesla and Ford also recovered from earlier losses.
Since auto manufacturers depend on a seamless North American supply chain, the delay in tariffs brings temporary stability to the industry.
Global Markets Respond to New Developments
European and Asian markets also showed signs of recovery following the announcement.
The Stoxx Europe 600 climbed 1.4%, reversing some of its earlier declines, while stock markets in Taiwan, South Korea, and Japan stabilized.
The cryptocurrency sector, which had seen $600 billion wiped off its value, also rebounded.
Trade Tensions With China and the EU Persist
Despite the positive shift regarding Mexico, broader trade tensions remain.
Trump’s administration has already imposed a 10% tariff on China, prompting Beijing to promise retaliatory measures.
Meanwhile, Trump continues to pressure the European Union, claiming that trade with the UK is “out of line” but hinting that a deal “can be worked out.”
Wall Street Reassesses Risks
Hedge funds that had been betting on a major market downturn may need to rethink their positions.
Data from Goldman Sachs had previously indicated a surge in short positions against U.S. stocks, but with markets now stabilizing, the outlook could shift.
Looking Ahead
While the suspension of Mexico’s tariffs offers relief, uncertainty remains regarding U.S. trade policies and their long-term economic impact.
Economists caution that further escalation in trade conflicts could still lead to inflation and economic slowdowns.
Investors are watching closely to see whether the Trump administration’s strategy will lead to lasting agreements or further volatility in the months ahead.
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