Trump agrees to pause Mexico tariffs as shares tumble over trade war fears

Donald Trump and his Mexican counterpart, Claudia Sheinbaum, have announced a last-minute “pause” in threatened US tariffs​ amid fears of a global trade war, with Canada and China expected to be hit with sudden increases in levies on exports to the US from Tuesday.

The details of an agreement came on a day of extreme volatility in global financial markets as rattled investors reacted to the prospect of a dramatically escalating dispute involving the world’s largest economies.
The US president had upended US-Mexico ties over the weekend when he announced 25% tariffs and accused Sheinbaum’s administration of engaging in an “intolerable alliance” with Mexican crime groups.

Sheinbaum rejected that “slanderous” accusation, but on Monday morning struck a softer note as she announced “a series of agreements” with Trump after a conversation between the two leaders during which they agreed to pause US tariffs for a month to allow for fresh negotiations. Mexico had agreed to send 10,000 members of its national guard “to prevent drug trafficking from Mexico to the US, in particular of fentanyl”, Sheinbaum said. In return, the US had agreed to work to prevent high-powered weapons crossing the border into Mexico.

Trump confirmed the deal shortly afterwards on his Truth Social network. He said 10,000 Mexican soldiers would be “specifically designated to stop the flow of fentanyl, and illegal migrants into our country”.

Negotiations involving senior Mexican officials, the US secretary of state, Marco Rubio, the US treasury secretary, Scott Bessent, and the US commerce secretary, Howard Lutnick, would take place during the pause, he said. Markets sold off sharply worldwide in response to what has been described as a “Trump tariff tantrum” before recovering some of their losses after news broke of the deal with Mexico. Wall Street fell in early trading, with the S&P 500 down almost 2%. Share prices in Europe followed a sharp move lower in Asia.

London’s FTSE 100 index dropped 1.4% from Friday’s record high before making back some of its losses to trade down 1%.

Trump also indicated on Sunday that the EU would be next to face tariffs, but did not say when.

EU leaders meeting at an informal summit in Brussels on Monday said Europe would fight back if the US imposed tariffs, but called for negotiation. The French president, Emmanuel Macron, said that if the bloc’s commercial interests were attacked it would “make itself respected and thus react”.

The German chancellor, Olaf Scholz, said the EU could respond if necessary with its own tariffs, but stressed it would be better for the two sides to find agreement on trade.

Trump hinted that Britain might be spared tariffs, saying: “I think that one can be worked out.”

Asked whether he was worried by Trump’s refusal to rule out imposing sanctions on the UK, the country’s prime minister, Keir Starmer, said: “Obviously, it’s early days.

“I think what’s really important is open and strong trading relations and that’s been the basis of my discussions with President Trump. I know that intense US-EU discussions are planned.”

Officials, analysts and economists who believe Trump’s tariffs could have disastrous consequences for the global economy and for Washinton’s place in the world voiced relief at the Mexico deal.

Experts believe Trump’s plans for 10% tariffs on China and 25% on Canada and Mexico would hamper global growth and cause inflation in the US. Even Trump admitted on Sunday that the measures might cause “a little pain”.

Brian Winter, the editor-in-chief of Americas Quarterly magazine and a Latin America expert, said: “I don’t think anyone expected a resolution today, and obviously it’s a relief. But the damage is done.