Wall Street Eases After Mexico Delays Tariffs
United States, Tuesday, 4 February 2025.
Wall Street showed relief after Mexico postponed tariffs on imports, stabilizing stocks amid fears of a trade war and mitigating early morning losses following Trump’s earlier tariff announcements.
Market Recovery After Initial Plunge
The U.S. stock market demonstrated remarkable resilience on February 2, 2025, after an initial sharp decline. The Dow Jones Industrial Average, which plummeted 665 points at the market’s opening [1][2], managed to pare its losses significantly, ending the day down just 122.75 points at 44,421.91 [2]. The S&P 500 followed a similar pattern, closing down 0.8% [1][2], showcasing the market’s ability to recover from trade-related anxieties.
Diplomatic Breakthrough Stabilizes Markets
The market’s recovery was largely attributed to a diplomatic breakthrough between the U.S. and Mexico. Mexican President Claudia Sheinbaum secured a one-month pause on the implementation of 25% tariffs following constructive discussions with President Trump [3][5]. As part of the agreement, Mexico committed to deploying 10,000 National Guard members to the U.S.-Mexican border to combat fentanyl trafficking [3][4], while the U.S. agreed to enhance measures against the flow of high-powered weapons into Mexico [3].
Economic Implications and Market Response
The temporary resolution has significant economic implications. Before the announcement, economists warned that the proposed 25% tariffs could have led to a 12% drop in Mexican exports [4] and potentially pushed both the Canadian and Mexican economies into recession [4]. The market’s response was reflected in various sectors, with companies like Constellation Brands experiencing volatility, while crude oil prices fluctuated between $74.50 and $72.58 per barrel [1][2].
Looking Ahead: Trade Negotiations
The focus now shifts to the upcoming negotiations during the 30-day tariff pause. U.S. Secretary of State Marco Rubio and Commerce Secretary nominee Howard Lutnick are set to lead discussions for a lasting trade and security agreement [5]. While markets have stabilized, uncertainty remains about the long-term economic impact, with Yale’s Budget Lab estimating that average U.S. households could face a loss of $1,170 in income if permanent tariffs are implemented [6].