Trump delays tariffs on Mexico, easing stocks, but Canada and China remain in play

WASHINGTON — Stocks largely recovered from an early tumble Monday after President Trump confirmed he would delay imposing tariffs on Mexico for a month. But other massive tariffs that were announced this weekend on Canada and China remained in play as they are set to take effect at midnight Tuesday.

The Dow Jones industrial average opened about 500 points lower after stock markets in Asia, led by Japan, fell sharply overnight. European stocks were trading lower as well. But by midmorning, after Mexico announced it had reached a deal with Trump to delay the tariffs, stocks regained much of the loss.

Even before Mexico’s announcement, financial markets, however, did not indicate panic, suggesting that many may still be holding out hope that Trump could pull back or delay his planned tariffs — 25% on Canada and Mexico, and 10% on Chinese goods. Most economists say the tariffs would likely stifle economic growth, lead to higher prices and hurt jobs.

Canada on Sunday announced retaliatory tariffs on the U.S., targeting farm goods and other products in Republican-led states for maximum political impact. Mexico and China also said they were preparing countermeasures.

“Some in the markets may hope that the tariffs are a hard-edged negotiating stance and that Trump may back down at the last minute as negotiations with Canada and Mexico are ongoing,” said Christopher Rupkey, chief economist at Fwdbonds in New York. “Markets are holding and investors are holding their breath. The next 24 hours could prove to be critical.”

Whether Trump is using the tariff sword purely as leverage or intends to actually use it, what’s clear is that the U.S. and its trading partners are entering a period of extreme uncertainty.

If the tariffs and countermeasures take effect, there will likely be chaos at the borders as many companies and government agencies seem unprepared for the sudden imposition of the new rules. If a trade war ensues, it will undoubtedly be costly to all sides, at least in the immediate future and also probably the longer run, as U.S. imports from Mexico, Canada and China totals some $1.4 trillion annually involving practically every kind of product under the sun.

Canada and Mexico are more vulnerable as they depend heavily on exports to the U.S. But the three North American economies are deeply integrated, particularly when it comes to auto production and trade in farm goods. Analysts say U.S. consumers will see higher prices at grocery stores within days, and as inventories of cars and other consumer goods are depleted, businesses are expected to pass on the higher cost to consumers.

Mexico supplies a lot of produce to Americans, and the U.S. imports billions of dollars of crude oil from Canada.

Besides significant disruptions to supply chains, countertariffs from trading partners will hurt American exporters. While tariffs on U.S. exports of things like liquor and soybeans will hit red state economies, California will feel the pain in slower sales of auto parts and electronics, among other goods, and seaports and logistics industries up and down the state will be impacted by decreasing Chinese shipments.