It was only a day or two ago when pundits and liberal economists (there aren’t many, but there are a few) were assuring us that a trade war with Mexico and Canada was underway, and would lead to higher prices in the U.S. and other significant economic damage. The stock markets opened steeply lower this morning, presumably as a result.
But wait! The Telegraph reports:
Donald Trump has agreed to delay US tariffs on Mexico for a month after winning concessions on the US-Mexican border.
Mexican president Claudia Sheinbaum wrote on X: “We had a good conversation with President Trump with great respect for our relationship and sovereignty; we reached a series of agreements”.
She added: “Mexico will immediately reinforce the northern border with 10,000 members of the National Guard to prevent drug trafficking from Mexico to the United States, particularly fentanyl.”
Mission accomplished.
Mr Trump said he had “agreed to immediately pause the anticipated tariffs for a one month period during which we will have negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, and Secretary of Commerce Howard Lutnick, and high-level Representatives of Mexico.”
More benefits to the U.S. are in the offing. Why did Mexico respond with such alacrity?
JP Morgan has forecast that both Mexico and Canada will fall into a recession as a result of the tariffs, with fellow Wall Street bank Morgan Stanley saying a recession in Mexico was now its “base case”.
How about Canada?
Mr Trump will later hold last-ditch talks with Justin Trudeau later as Canada braces for the introduction of tariffs that could plunge them into recession.
The US president said he had spoken with the Canadian prime minister today and would do so again at 8pm UK time.
“Canada doesn’t even allow US banks to open or do business there. What’s that all about?,” Mr Trump wrote on his Truth Social platform.
My guess is that an actual trade war will be averted there, as well. That is the message the administration is sending:
The White House said earlier that it had noticed that Mexico is “serious” about Mr Trump’s executive order on tariffs, but Canada had “misunderstood” it to be a trade war between the neighboring countries.
Kevin Hassett, the director of the White House’s National Economic Council, told CNBC: “The good news is that in our conversations over the weekend, one of the things we’ve noticed is that Mexicans are very, very serious about doing what President Trump said.
“Canadians appear to have misunderstood the plain language of the executive order and they’re interpreting it as a trade war.”
Stay tuned for news from China.
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