Trump suspended planned tariffs on Mexico and Canada after talks with their leaders

On Monday’s close, the Dow Jones Index (US30) was down 0.28%. The S&P 500 Index (US500) decreased by 0.76%. The Nasdaq Technology Index (US100) fell by 0.84%. Global stock markets came under pressure on Monday after President Trump on Saturday announced 25% tariffs on Canada and Mexico and 10% tariffs on China, and warned of impending European tariffs. The tariffs were due to take effect on Tuesday and could spark a trade war that threatens economic growth around the world. Goldman Sachs warned there was a risk of a 5% drop in US stocks due to the hit to corporate earnings, while RBC Capital Markets estimated a 5% to 10% drop in stocks. However, stocks recovered more than half of their losses after President Trump agreed late in the day to suspend planned tariffs on Mexico and Canada for a month after successful talks with their leaders.

The Canadian dollar strengthened to 1.45 per US dollar in February, rising from its lowest level in two years, after Prime Minister Trudeau confirmed that the imposition of US tariffs on Canadian goods would be suspended for at least 30 days. The postponement alleviated immediate concerns over potential trade disruptions, which had pressured the loonie due to fears of lower demand for Canadian exports and restricted foreign exchange inflows. Despite this, the CAD remains under pressure as Canadian GDP growth in December was just 0.2%, leaving the annualized growth rate for 2024 at a modest 1.4%.

The Mexican peso (USD/MXN) strengthened to 20.5 per US dollar, recovering after briefly falling to a three-year low after US President Trump delayed the imposition of tariffs against Mexico announced over the weekend. The US president cited talks with Mexican counterpart Sheinbaum and progress on the border issue, supporting bets that the restrictions will be avoided by the new deadline.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 1.40%, France’s CAC 40 (FR40) closed down 1.20%, Spain’s IBEX 35 (ES35) lost 1.32%, and the UK’s FTSE 100 (UK100) closed down 1.04%.

WTI crude oil prices trimmed gains and traded near $73 per barrel after OPEC+ confirmed a gradual increase in production and removed the US Energy Information Administration (EIA) from its list of sources for monitoring production. The decision follows past tensions between OPEC+ and President Trump, who has previously pressured the group to increase supply to offset US sanctions on Iran. Since returning to office, Trump has again urged OPEC to release more oil, arguing that high prices support Russia’s war in Ukraine.

Silver (XAG/USD) topped $31.5 an ounce on Monday, near its highest since early December, amid easing trade war fears and optimism about improving demand for manufactured goods. Meanwhile, strong manufacturing data from ISM pointed to welcome momentum in US factory activity, which supported silver’s prospects as industrial demand, especially in electrification technologies. On the supply side, the Silver Institute recently predicted a fifth consecutive year of significant market shortages of the metal in 2025, driven by strong industrial demand and retail investment.

Asian markets were mostly falling yesterday. Japan’s Nikkei 225 (JP225) was down 2.66%, China’s FTSE China A50 (CHA50) lost 0.37%, Hong Kong’s Hang Seng (HK50) was 0.04% cheaper, and Australia’s ASX 200 (AU200) was negative 1.79%.

US President Donald Trump is set to speak to his Chinese counterpart Xi Jinping as early as this week as the two major economies work towards a deal to avoid wider trade tensions. On Monday, Beijing called on Washington for “frank dialogue and strengthened cooperation,” stressing that the tariffs are counterproductive and harmful to normal trade relations. Beijing also plans to sue the World Trade Organization.