President Trump temporarily paused tariffs imposed on Mexico following a conversation with Mexican President Claudia Sheinbaum. However, tariffs on Canada and China remain in place. The market initially fell due to the uncertainty created by the new tariffs.
Early trading saw the Dow slide about 150 points, or 0.35%, while the S&P 500 dropped 0.7%, and the tech-heavy Nasdaq ticked 1%. Traders, particularly those in the auto industry with significant ties to suppliers in Canada and Mexico, demonstrated their concerns with a selloff. Shares of General Motors fell 2%, and Ford’s stock price dropped 1.3%.
The downturn was not confined to the U.S.; Japan’s Nikkei index fell 2.5%, and the pan-European STOXX 600 dropped about 1%. President Trump had announced over the weekend the imposition of 25% tariffs on products from Mexico and Canada and 10% on goods from China, with these tariffs set to take effect on Tuesday. Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum quickly responded to the announcement, pledging retaliatory measures.
Trump halts tariffs, the market reacts
Trudeau stated that Canada would impose 25% tariffs on $155 billion worth of U.S. goods, while Sheinbaum mentioned a “Plan B,” including various tariff and non-tariff measures to protect Mexico’s interests. Experts suggest that the newly imposed tariffs could raise prices for various products, from avocados to gasoline.
The extent of the price increase remains uncertain, as some businesses within the supply chain may absorb the additional costs. Potential retaliatory tariffs from Canada and Mexico could make it more challenging for U.S. exporters to compete in those markets, potentially leading to weaker sales. In a series of posts on social media over the weekend, Trump defended the tariffs, arguing that they target countries contributing to the manufacture and transport of illicit drugs into the U.S. He acknowledged the potential financial hardships but insisted the measures are necessary.
“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID,” Trump wrote on Truth Social.
The pause on Mexico’s tariffs has offered a reprieve to the markets, but significant uncertainties remain about future trade relations and their economic impact.
