Trump tariffs suspended – for now

Recent developments regarding U.S. trade policy have led to the suspension of planned tariffs on Canada and Mexico, avoiding a potential trade war. However, Trump tariffs on Chinese imports have come into effect, and uncertainty may still linger across global markets.

Trump tariffs against Mexico and Canada – what’s going on?

The Trump tariffs against Canada and Mexico were suspended for 30 days following last-minute negotiations. Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum committed to enhanced border security, addressing issues such as illegal migration and drug trafficking.

Trudeau pledged to implement a $1.3 billion border security plan, which includes deploying nearly 10,000 frontline workers, appointing a “fentanyl czar,” and launching a joint strike force with the U.S. to combat crime, fentanyl trafficking, and money laundering.

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Mexico committed to deploying 10,000 National Guard troops to its northern border and enhancing coordination with U.S. law enforcement to curb illegal migration and limit gun trafficking. This temporary truce comes as both countries were prepared to impose retaliatory tariffs on American goods. While this suspension has temporarily eased tensions, the possibility of future trade disputes remains.

How did Mexican and Canadian Tariffs affect the market?

The looming threat of Mexican and Canadian tariffs had markets on edge, leading to heightened volatility. Businesses reliant on cross-border trade saw temporary relief following the tariff suspension, but uncertainty still lingers. Traders and investors are closely monitoring the situation, given that any escalation could impact key sectors such as energy, agriculture, and manufacturing.

Major currency pairs after Trump tariffs’ suspension

The suspension of Trump tariffs against Canada and Mexico brought immediate relief to major currency pairs, particularly those involving the U.S. dollar, Mexican peso ( USDMXN ), and Canadian dollar (USDCAD).

Canadian Dollar retraces the full move.

The USDCAD pair saw reduced volatility as the Canadian dollar strengthened slightly after the announcement. Despite this, since the end of September, 1 US dollar still costs over 7% more loonies. The RSI indicator remains above 50, which indicates an advantage for the bulls.

USDMXN erases tariff-induced gain.

Similarly, the Mexican peso benefited from the suspension, though concerns about potential future tariffs persist. The pair has risen by more than 22% since May last year, showing the currency’s weakness against the US dollar.

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Stock market

Stocks linked to cross-border industries, such as automotive and energy, initially experienced turbulence due to the uncertainty surrounding Mexican and Canadian tariffs. Following the suspension, these sectors saw a modest recovery. However, traders remain cautious, especially given the ongoing 10% tariff on Chinese imports, which could ripple through global supply chains.

The S&P500 unfazed by the trade war.

Overall, the broad market remains unfazed by the one-day tariff war in North America. The gap in the S&P500 ( US500 ) has closed, and the market is retracing part of the upside correction. The RSI is holding below 50, so the market remains slightly bearish and sensitive to all data.

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U.S. Sovereign Wealth Fund: Need to know

Alongside Trump tariffs, President Trump announced the creation of a U.S. Sovereign Wealth Fund . Designed to leverage the country’s vast federal assets, the fund aims to support national projects and economic growth while offering long-term fiscal stability. President Trump signed an Executive Order directing the Secretary of the Treasury and the Secretary of Commerce to deliver a comprehensive plan within 90 days. This plan will cover critical details such as funding mechanisms, investment strategies, the structure of the fund, and a governance model.

The fund aims to maximize the financial return on U.S. national assets, including $5.7 trillion in federal assets and a larger sum when considering natural resource reserves. By leveraging these returns, the fund seeks to promote fiscal sustainability, reduce tax burdens, and enhance U.S. strategic and economic leadership globally. The initiative reflects global trends, as many countries maintain sovereign wealth funds to amplify national wealth. Notably, the U.K. recently announced similar plans, and within the U.S., 23 states currently maintain their own funds, collectively managing $332 billion in assets.

President Trump emphasized that the fund will be used to invest in major national projects and promote long-term economic security. His administration’s policies on fair trade, energy independence, and tax reforms are expected to generate additional revenue streams, further boosting the potential of this fund.

Trump tariffs: Conclusion

Trump tariffs have once again demonstrated their power to disrupt global markets. Although the temporary suspension with Canada and Mexico has provided some relief, traders must remain vigilant. The ongoing 10% tariff on Chinese imports and the looming threat of tariff escalation underscores the importance of tracking trade policy developments closely. The situation remains fluid, and market participants should be prepared for rapid changes.

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