Tariffs On Hold Indefinitely After U.S. and Mexico Reach Deal on Border Security

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resident Donald Trump said on Friday that the United States and Mexico have signed an agreement to avoid tariffs that were scheduled to go into effect on Monday.

Trump said that Mexico in return has agreed to take “strong measures” to stop illegal migration from coming through the U.S. southern border. 

Mexico’s Foreign Minister Marcelo Ebrard also announced that the U.S. would not impose tariffs. Ebrard said on Thursday that Mexico would deploy its national guard to its southern borderwith Guatemala in an effort to slow migration from Central America.  

Last week, Trump had threatened to impose 5% tariffs on all Mexican imports starting June 10 if Mexico didn’t do more to stop illegal immigration. Those tariffs were set to gradually increase to 25% over the coming months if Mexico did not meet the White House’s demands. 

Trump’s abrupt decision to target Mexico shook markets, which were already facing uncertainty over the escalating trade war between the U.S. and China. 

The Dow dropped 3% the week ending May 31, posting its sixth weekly loss and its longest losing streak since 2011. Trump’s tariff threat had sent the peso reeling against the dollar and put pressure on automakers such as GM, Ford and Fiat which produce cars in Mexico. 

Amid concerns that Trump was opening another trade war, Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank is “closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion.”

The Dow closed up on Friday, posting its best week since November, on the hope that the Federal Reserve would cut interest rates.

Mexico President Andres Manuel Lopez Obrado had quickly signaled that he was willing to cut a deal to avoid tariffs by tightening immigration controls. 

Mexican and U.S. officials met in Washington this week to discuss the border and Trump indicated that there was a good chance tariffs would be averted.

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