Market sentiment rebounded sharply after the US announced a one-month pause on planned tariffs against Mexico, following an agreement on border security measures. DOW recovered to around 44,400 after initially dropping to 43,920 in early trading, reflecting renewed optimism that negotiations could lead to a resolution despite the aggressive tariff rhetoric from the US administration.
The shift in tone was confirmed by President Donald Trump’s Truth Social post, where he stated that he had a “very friendly conversation” with Mexico’s President Claudia Sheinbaum. As part of the agreement, Mexico will deploy 10,000 soldiers along its border with the US to curb fentanyl trafficking and illegal migration. Trump also announced that high-level negotiations, led by key officials including Secretary of State Marco Rubio, will take place over the next month to work toward a “deal.”
The move suggests that while tariffs remain a significant geopolitical risk, there is room for diplomatic efforts to prevent further economic disruption. The pause in Mexican tariffs could set a precedent for similar discussions with Canada and China, though uncertainty remains high regarding the administration’s broader trade strategy. For now, markets appear to be viewing this as a sign that Trump’s threats may be a negotiating tactic rather than an immediate escalation.
Fed officials stress patience on rate cuts amid tariff uncertainty
A trio of Fed officials cautioned that new broad-based tariffs could add upward pressure to consumer and producer prices, suggesting a slower pace of rate cuts than previously anticipated.
Boston Fed President Susan Collins highlighted yesterday that tariffs on both final and intermediate goods risk inflating costs throughout supply chains, requiring “patient” policy decisions.
“It’s really appropriate for policy to be patient, careful, and there’s no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we’re still somewhat restrictive,” Collins said.
Chicago Fed President Austan Goolsbee also stressed “a ton of uncertainty,” warning that a premature return to lower rates could reignite inflation.
“We’ve got to be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again,” Goolsbee said.
Meanwhile, Atlanta Fed President Raphael Bostic noted that any tariff-related surge in prices or inflation expectations might warrant close monitoring before further easing steps are taken.