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Global markets experienced significant volatility as Donald Trump stepped back from an imminent trade war with Canada and Mexico by delaying the implementation of sweeping new US tariffs. The US president has postponed his threatened 25% tariffs on the two countries for the third time in two weeks, whilst China remains poised to face an additional 10% levy on its exports to the US from Tuesday.
Following crucial discussions with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum, Trump agreed to a last-minute postponement of new duties. This development emerged during a period of extreme market uncertainty as investors grappled with the prospect of escalating tensions between the world’s largest economies.
The Mexican administration has committed to deploying 10,000 national guard members to combat drug trafficking, particularly focusing on fentanyl flowing into the US. In reciprocation, the US has pledged to address the issue of high-powered weapons crossing into Mexico. Senior officials from both nations, including US Secretary of State Marco Rubio, Treasury Secretary Scott Bessent, and Commerce Secretary Howard Lutnick, will engage in negotiations during this pause.
Canada’s involvement centres around a substantial $1.3 billion border enhancement plan, incorporating new helicopters, technology, and personnel. Prime Minister Trudeau emphasised their commitment with nearly 10,000 frontline personnel dedicated to border protection.
Economists have cautioned that Trump’s proposed tariff strategy risks elevating prices for millions of Americans, contrasting sharply with his inaugural pledge to rapidly reduce costs. The market response was immediate, with Wall Street experiencing early trading declines as the S&P 500 dropped almost 2%. European markets followed suit, with London’s FTSE 100 initially falling 1.4% from Friday’s record high before partially recovering.
The European Union appears to be Trump’s next target, though timing remains unspecified. EU leaders, meeting in Brussels, have signalled their readiness to retaliate if necessary while maintaining a preference for negotiated solutions. The UK might be spared from tariffs, with Trump suggesting potential for a workable arrangement with Britain.
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