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Sweeping US tariffs on Mexico were paused just hours before they were due to come into effect after an eleventh hour phone call between Donald Trump and Mexican President Claudia Sheinbaum on Monday.
At a press conference in Mexico City on Monday, Sheinbaum said the US president had agreed to delay the 25 per cent tariffs for a month after she agreed to send 10,000 National Guard troops to the northern 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.”
Trump confirmed the month-long pause, posting on social media that he and Sheinbaum had had 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.
The Mexican peso rapidly reversed its earlier losses after news of the agreement between Sheinbaum and Trump, with the currency trading more than 1 per cent higher against the dollar by the late afternoon in London.
The Canadian dollar also trimmed earlier declines to trade 0.4 per cent lower against the greenback, while a gauge of the US currency against six other peers gave up earlier gains to trade just 0.4 per cent higher on the day.
US stocks also pared earlier falls, with the S&P 500 down 0.6 per cent and the technology-heavy Nasdaq Composite down 1 per cent, compared with declines of more than 2 per cent at the start of the trading session.
Asked about the rationale for the last-minute pause, Ed Al-Hussainy, rates analyst at Columbia Threadneedle, said: “The honest truth is I don’t have a clue and I’m jealous of anyone who does. I’m just glad we didn’t make any trades.”
Reporters at Sheinbaum’s news conference broke into applause as a beaming president said Mexico had sought a conversation with Trump since last week.
Trump’s plan to put a 25 per cent tariff on all imports from Mexico and Canada from Tuesday had roiled global markets and threatened to ignite a global trade war.
He insists the tariffs 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.
Trump spoke to Canadian Prime Minister Justin Trudeau earlier in the day and said they would hold another phone call at 3pm ET. Neither side announced the pause of tariffs for Canada.
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 and said she had pointed out that they were partners and that the best way forward was strong co-operation.
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