U.S. President Donald Trump has paused new tariffs on Mexico for one month after Mexico agreed to strengthen its northern border with 10,000 National Guard members to stop illegal migration and drug trafficking.

According to Reuters, the deal also includes a U.S. promise to help prevent the smuggling of high-powered weapons into Mexico.

The agreement came just hours before tariffs on Mexico, China, and Canada were set to begin, which economists warned could hurt the U.S. economy by raising prices for businesses and consumers.

Trump said the U.S. and Mexico will use the next month to negotiate further. On social media, he wrote that he looks forward to working with Mexican President Claudia Sheinbaum to reach a deal. Sheinbaum, in a press conference, said the two countries have a month to find the best way forward.

This pause in tariffs is a temporary relief for Mexico, but Canada and China still face tariffs starting Tuesday, as reported by Reuters.

The tariffs were announced just two days ago and would have affected $2.1 trillion in trade with Mexico, Canada, and China.

Trump’s sudden change highlights the unpredictable nature of his second presidency. While Mexico gets a break, Canada and China are unlikely to see similar relief soon. Trump criticized Canada, saying the U.S. is “not treated well” by its northern neighbor.

He also warned that tariffs on China could increase if Beijing doesn’t stop sending fentanyl, a deadly opioid, to the U.S.

Canada has announced it will retaliate with its own tariffs, and a senior Canadian official told Reuters that Ottawa doesn’t expect a quick resolution. The uncertainty caused a rocky day for global stock markets, with U.S. stocks initially falling before recovering some losses after the Mexico deal was announced. The Mexican peso also stabilized slightly.

Trump also hinted that the European Union (EU) could be his next target for tariffs, accusing the bloc of not buying enough U.S. goods. EU leaders, however, said they are ready to fight back with their own tariffs if needed but prefer negotiation.

German Chancellor Olaf Scholz stressed that finding agreement is better than a trade war. Reuters notes that the U.S. is the EU’s largest trade partner, with a significant trade deficit in goods but a surplus in services.

Economists warn that the proposed tariffs could slow global growth and raise prices for Americans. The International Chamber of Commerce estimates that Mexico’s economy could shrink by 4% and Canada’s by 2.6% if the tariffs go into effect.

Analysts also fear the tariffs could push Canada and Mexico into recession and cause “stagflation” in the U.S., a mix of high inflation and slow growth.

Despite the risks, Trump argues the tariffs are necessary to stop illegal immigration, drug trafficking, and to boost U.S. industries.

Meanwhile, China has said it will challenge the tariffs at the World Trade Organization and take other countermeasures but remains open to talks. Canada has also vowed to take legal action against the tariffs.

Reuters highlights that while the Mexico deal offers temporary relief, the broader trade tensions between the U.S., Canada, China, and potentially the EU could have serious economic consequences.

The next month will be crucial as the U.S. and Mexico try to negotiate a longer-term solution.

Credit : Reuters

https://www.reuters.com/world/us/trump-says-americans-may-feel-pain-trade-war-with-mexico-canada-china-2025-02-03

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