Although still in the red, U.S. stock markets are recovering at midday on Feb. 3 after U.S. President Donald Trump said he is pausing for one month his new 25% tariffs on goods imported from Mexico.
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The pause in duties placed on Mexican imports comes after that country’s president agreed to immediately send 10,000 soldiers to the U.S. border to prevent drug trafficking. In a social media post, Trump said that during the pause “we will have negotiations” on the tariffs.
Trump also said, “I look forward to participating in those negotiations” with Mexico President Claudia Sheinbaum “as we attempt to achieve a ‘deal’ between our two countries.” The announcement came two days after Trump slapped 25% tariffs on most goods from Mexico and Canada, and 10% tariffs on goods imported from China.
Fortifying the Border
Sheinbaum over the weekend threatened retaliatory tariffs on goods imported from the U.S. and nontariff measures, but had not disclosed the rate for the tariffs. At the same time, Canadian Prime Minister Justin Trudeau said that his country would implement a 25% tariff against $155 billion in U.S. goods in retaliation for Trump’s tariffs. China has said it will challenge the tariffs at the World Trade Organization.
Trump said he and Sheinbaum spoke ahead of the announcement of the pause and that Mexico has agreed to help fortify America’s southern border with Mexican National Guard troops. The Mexican soldiers will help halt drug trafficking from Mexico, particularly of the deadly opioid fentanyl, said Trump.
Markets Recover
Trump added that the Mexican troops will help to stop the flow “of migrants into our country.” All three major U.S. stock indices remain in the red. However, the blue-chip Dow Jones Industrial Average (DJIA) is only down 120 points at noon hour, an improvement from its 600 point decline earlier in the day.
The benchmark S&P 500 index (SPX) is down about 1% on the day and the technology-laden Nasdaq index has dropped 270 points, or 1.38%.
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The SPDR S&P 500 ETF Trust (SPY), which tracks the benchmark S&P 500 index, has a consensus Moderate Buy rating among 505 Wall Street analysts. That rating is based on 398 Buy, 101 Hold, and six Sell recommendations issued in the last three months. The average SPY price target of $682.40 implies 14.08% upside from current levels.
