The United States and Mexico have reached a temporary agreement suspending new tariffs, following negotiations between President Donald Trump and his Mexican counterpart, Claudia Sheinbaum. On February 1, Trump made good on previous threats by slapping a 25% tariff on Mexican and Canadian imports, as well as a 10% additional levy on Chinese goods, escalating trade tensions. However, Sheinbaum’s commitment to deploying 10,000 troops to Mexico’s northern border to combat drug trafficking and illegal migration seems to have led to a one-month pause in the tariffs.

The sudden imposition of tariffs had sparked concerns over potential economic disruption, with analysts warning that Mexico’s GDP could shrink by up to 1.5% if the levies remained in place. The peso, which initially weakened, started recovering after the announcement of the temporary deal. Mexico, the largest exporter to the US, saw its trade relationship with Washington put at risk, with American industries heavily reliant on Mexican manufacturing.

Despite securing a reprieve, Sheinbaum denounced Trump’s accusations of collusion with criminal groups as “slanderous,” highlighting her administration’s record in seizing fentanyl and arresting thousands of traffickers. She also noted that while Mexico remained open to cooperation, its sovereignty was not up for negotiation. In return for the troop deployment, the US pledged to work on curbing the smuggling of firearms into Mexico, a key demand from Sheinbaum’s government.

Arizona Governor Katie Hobbs reacted to the deal by calling it a “band-aid solution” that fails to address the root causes of migration and drug trafficking. She argued that while increasing security on the border was necessary, broader immigration reforms and stronger US-Mexico cooperation were essential. “This is just another political maneuver,” Hobbs stated, adding that Arizona’s economy remains vulnerable to Trump’s trade policies.

While the latest twist eases immediate tensions, negotiations between senior officials from both countries will continue. Trump stated he was personally involved in discussions and hinted that tariffs could be reinstated at short notice if Mexico fails to meet its commitments. With the future of the USMCA trade agreement now in question, economic uncertainty looms, leaving North American businesses and investors on edge.