President Donald Trump has announced a one-month pause on new tariffs against Mexico after the country agreed to deploy 10,000 National Guard troops along its northern border to curb the flow of illegal drugs, particularly fentanyl.
As part of the agreement, the U.S. also committed to measures aimed at preventing the trafficking of high-powered weapons into Mexico, Mexican President Claudia Sheinbaum said on X. The two leaders spoke by phone on Monday, just hours before tariffs on Mexico, Canada, and China were set to take effect.
Trump said the temporary suspension will allow time for further negotiations.
“I look forward to participating in those negotiations with President Sheinbaum as we attempt to achieve a deal between our two countries,” he wrote on Truth Social.
Sheinbaum echoed the sentiment during a press conference, stating, “We have this month to work and convince each other that this is the best way forward.”
Following the announcement, U.S. stocks rebounded from earlier losses triggered by fears of a widening trade war. The S&P 500, which had dropped sharply in early trading, was down 0.7% by mid-morning, recovering some of its earlier losses. The Mexican peso also strengthened after the news.
Trump also spoke with Canadian Prime Minister Justin Trudeau on Monday and planned another call later in the day. However, tariffs on Canada and China remain scheduled to take effect on Tuesday, with Canada already announcing retaliatory measures.
A senior Canadian official told The New York Times that Ottawa was not optimistic about securing a similar reprieve.
Speaking in Washington after returning from his Mar-a-Lago estate, Trump suggested that the 27-nation European Union could be next to face tariffs, though he did not specify a timeline.
“They don’t take our cars, they don’t take our farm products. They take almost nothing, and we take everything from them,” he told reporters.
EU leaders, meeting in Brussels on Monday, warned they were prepared to retaliate but called for negotiation. French President Emmanuel Macron stated that if Europe’s commercial interests were attacked, the EU would “make itself respected and thus react.” German Chancellor Olaf Scholz emphasized the need for a trade agreement but warned that the bloc could impose its own tariffs if necessary.
Trump hinted that Britain, which left the EU in 2020, might be spared from potential tariffs, stating, “I think that one can be worked out.”
The U.S. remains the EU’s largest trade and investment partner. According to 2023 Eurostat data, the U.S. had a trade deficit of 155.8 billion euros ($161.6 billion) in goods with the EU, though this was offset by a surplus of 104 billion euros in services.
EU foreign policy chief Kaja Kallas warned against escalating tensions, stating, “There are no winners in a trade war. If one breaks out between Europe and the U.S., the only one laughing on the sidelines is China.”
Trump’s proposal to impose 25% tariffs on Canada and Mexico and 10% on China has sparked fears of a global economic slowdown and rising prices in the U.S. He defended the tariffs as necessary to curb illegal immigration, combat drug trafficking, and boost domestic industries.
Financial markets reflected concerns about the economic fallout. Tokyo stocks fell nearly 3%, and Australia’s benchmark index, often seen as a proxy for Chinese markets, dropped 1.8%. Germany’s DAX fell 1.8%, France’s CAC 40 declined 1.9%, and Britain’s FTSE 100 dropped 1.5%.
The Chinese yuan, Canadian dollar, and Mexican peso all weakened against the U.S. dollar, while oil prices rose more than 1%, with gasoline futures surging nearly 3%.
Trump’s tariffs would impact nearly half of all U.S. imports, requiring a massive increase in domestic manufacturing output to offset the gap—something analysts at ING called “unfeasible” in the short term. Some experts warned the tariffs could push Canada and Mexico into recession and cause “stagflation”—a combination of high inflation, stagnant growth, and rising unemployment—in the U.S.
In Europe, Deutsche Bank economists estimated that if Trump imposes 10% tariffs on the EU, it could reduce the bloc’s GDP by 0.5%.
A White House fact sheet did not specify what additional steps Canada, Mexico, or China would need to take to secure a long-term reprieve. Trump said the sanctions would remain until the “national emergency” over fentanyl and illegal immigration was resolved.
China dismissed Trump’s claims, arguing that fentanyl abuse is an American issue. Beijing vowed to challenge the tariffs at the World Trade Organization and take countermeasures but left the door open for negotiations.
Canada announced plans to pursue legal action through international trade bodies.
The auto industry is expected to be one of the hardest-hit sectors. New tariffs on vehicles manufactured in Canada and Mexico could disrupt a complex supply chain where car parts cross borders multiple times before final assembly. Shares of Ford and General Motors each fell between 4% and 5% following the announcement.
European automakers also faced steep declines, with Volkswagen, BMW, Porsche, Stellantis, and Daimler Truck all dropping between 5% and 6% in Monday’s trading.
