Trump pauses tariff threats on Mexico and Canada, global markets react

30-day tariff delay sparks market surge

US President Donald Trump announced a 30-day pause on his planned tariff hikes against Mexico and Canada. The move led to a surge in US equity futures, while the Mexican peso and Canadian dollar reversed losses.

Trump stated that he would temporarily hold off on imposing steep tariffs on imports from Mexico and Canada, following discussions with Canadian Prime Minister Justin Trudeau.

According to reports, this decision fueled market optimism:

• S&P Futures rose 0.4% on Tuesday.
• The euro experienced sharp fluctuations, dipping to $1.0125 before rebounding to $1.0320 within 24 hours.

Tensions with Canada & Northern Border security

Trump indicated that tensions remained higher with Canada, but after two conversations with Prime Minister Trudeau, he posted on Truth Social, stating:

“Canada has agreed to ensure we have a secure Northern Border and to finally end the deadly scourge of drugs like fentanyl.”

Global market reactions to tariff delays

Hong Kong & Asian Markets Gain

• Hong Kong’s Hang Seng Index jumped 2.5%, led by electric vehicle makers.
• Li Auto surged 8%, while semiconductor giant SMIC rose over 7% to a record high.
• Australian shares advanced 0.4%, and Japanese stocks climbed 1.7%, though gains were lower than Monday’s sell-off.
• Chinese markets remained closed for the Lunar New Year, but the offshore yuan strengthened to 7.3112 per dollar from 7.3765.

European & US markets show caution

• European equity futures edged up 0.2%, signaling a more cautious approach.
• Brent crude oil futures traded at $75.46 per barrel, near a one-month low.
• Bitcoin rebounded from a low of $91,000 to around $102,000.

Ross Mayfield, an investment strategy analyst at Baird, described the situation:
“We should get used to this rollercoaster of public negotiations around tariffs and other policies.”

Gold prices near record highs amid uncertainty

• Gold prices surged on Monday, hitting an all-time high of $2,830.49 per ounce before settling at $2,820.69 per ounce on Tuesday.
• Tariff concerns and inflation fears have driven safe-haven demand for gold.
• Investors await key US jobs data this week, which could influence the Federal Reserve’s interest rate cut decisions.

Outlook on trade and global markets

Trump’s tariff strategy remains fluid, as investors closely watch developments in the ongoing trade tensions with Canada, Mexico, China, and Europe. While a lower 10% tariff on Chinese goods is still expected, markets remain uncertain about further trade policy shifts.

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