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Donald Trump halted sweeping tariffs on Mexico and Canada hours before they were due to come into force, causing markets to whipsaw as investors and companies struggled to absorb a flurry of White House policy announcements.
Deals to hold off on tariffs for a month on two of the US’s largest trading partners were announced following separate bilateral calls between Trump and Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau.
On Monday morning, Sheinbaum said Trump had delayed the 25 per cent tariffs after she promised to send 10,000 National Guard troops to the border with the US to combat drug trafficking,
“It was a good conversation, with respect,” she said. “It’s about collaboration, co-ordination, without losing sovereignty.”
Later on Monday, Trudeau said Trump had agreed a similar month-long pause with Canada, in exchange for Ottawa agreeing to have 10,000 “frontline personnel” working at the border.
Trump’s announcement on Friday evening of high tariffs on Mexico, Canada and China marked his first big international economic policy move since he took office again on January 20, rattling investors and US allies with the lurch towards protectionism.
The Mexican peso fell as much as 3 per cent against the dollar on Monday but rose after the pause was announced. Shares in carmakers with integrated supply chains across North America fell sharply, with General Motors down 6 per cent, before paring losses.
Trump confirmed the month-long pause with Mexico and Canada in social media posts. He described his call with Sheinbaum as a “friendly conversation”.
He added that US Treasury secretary Scott Bessent, commerce secretary Howard Lutnick, and secretary of state Marco Rubio would hold talks with high-level Mexican officials on trade and security.
“I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a ‘deal’ between our two Countries,” Trump wrote.
Canadian Prime Minister Justin Trudeau spoke to Trump on Monday afternoon, writing on X that “proposed tariffs will be paused for at least 30 days while we work together”.
The 30 day reprieve means the deal would expire during Trudeau’s final days before a new Liberal leader is chosen on March 9, setting up another round of uncertain negotiations.
A senior Canadian official said the government would hold a cabinet meeting on Monday evening to discuss how to implement the agreement with Trump.
The Canadian dollar trimmed earlier declines to trade flat against the greenback, amid hopes for a deal, while a gauge of the US currency against six other peers gave up earlier gains to trade just 0.1 per cent higher on the day.
US equities indices also pared earlier falls, with the S&P 500 closing 0.8 per cent lower, compared with a decline of almost 2 per cent at the start of Monday’s trading session.
Trump insists the tariffs on Mexico and Canada are needed to get the two countries to do more to stop migrants and drugs crossing into the US.
US companies have pushed back against the plans, warning they would push up prices for Americans and upend supply chains.
Sheinbaum said her call with Trump lasted about 45 minutes and that she had explained Mexico’s concerns over the smuggling of sophisticated weapons from the US that were being used by the country’s criminal groups. She added that the US president had agreed to help stop the arms trafficking.
The Mexican leader said Trump also brought up the trade deficit between the two countries.
“I told him that, in reality it wasn’t a deficit, that we had a trade deal, that we were trade partners and that this was the result of being trade partners; and that either way it was the best way to keep competing against China and other regions of the world,” Sheinbaum said.