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US PRESIDENT DONALD Trump paused tariffs on Mexico for one month after last-minute talks today – but there was no breakthrough yet in negotiations with Canada on an issue that has sparked fears of a global trade war.
As world markets slumped, Trump and his Mexican counterpart Claudia Sheinbaum both announced the halt in the levies after she agreed to send 10,000 troops to the US-Mexico border following talks.
Trump said on his Truth Social network that after the “very friendly conversation” he had “agreed to immediately pause the anticipated tariffs for a one month period.”
During that time there would be further talks “as we attempt to achieve a ‘deal’ between our two Countries,” the Republican said.
Leftist Sheinbaum had announced the tariff pause a few minutes earlier, saying she had a “good conversation with President Trump with great respect for our relationship and sovereignty.”
Trump agreed to increase measures to prevent trafficking of US weapons into Mexico, she said – a point that did not appear in Trump’s statement.
The development came hours before the 25% levies that Trump has ordered on imports from the US neighbours and chief trading partners – plus an extra 10% on China – were due to take effect at midnight on Tuesday.
Trump said he had also spoken to Canadian Prime Minister Justin Trudeau on Monday and was due to speak again at 3pm (8pm GMT) – but the White House said negotiations with Ottawa were not going as well.
Trump repeated his frequent claims that the United States is being unfairly treated by trade while pushing his argument that the tariffs were about a “drug war” from opioids “pouring through the Borders of Mexico and Canada.”
US government figures show that only a minimal quantity of drugs comes via Canada.
Spiralling fears of a global trade war had earlier sent US, European and Asian markets into a fall.
Wall Street stocks opened sharply lower, a European push lower was driven by Frankfurt and Paris with falls of around 2%, and Asian equity markets mostly slid by the close.
The Mexican peso and Canadian dollar also sank against the greenback, while oil jumped despite Trump limiting the levy on Canada’s energy imports at 10% to avoid a spike in fuel prices.
The White House said earlier there had been a “heck of a lot of talks” over the weekend – and that they had gone better with Mexico than Canada.
“This is not a trade war, this is a drug war,” National Economic Council Director Kevin Hassett told CNBC.
“The Mexicans are very, very serious about doing what President Trump said” in his order imposing the tariffs, he said. “But the Canadians appeared to have misunderstood the plain language.”
Canada has vowed to respond strongly to the tariffs.
The US president – who has said that tariff is the “most beautiful word in the dictionary” – is going even further in his second term on the levies than he did in his first.
He has insisted that the impact would be borne by foreign exporters without being passed on to American consumers, despite most experts saying the contrary.
But the billionaire 78-year-old did acknowledge Sunday that Americans might feel economic “pain”.
Taoiseach Micheál Martin has said the European Union needs to “act as one” in responding to any threat of tariffs levied by Trump.
Trump said last night that he “definitely” intends to levy new tariffs on the European Union as well.
“I wouldn’t say there’s a timeline but it’s going to be pretty soon,” he said. “The European Union, it’s an atrocity what they’ve done.”
Trump’s threat of EU tariffs are at the forefront of the minds of European leaders, including the Taoiseach, as they meet today in Brussels.
“First of all, the European Union has to act as one. We are an economic entity. We have a single market,” said Martin.
“Trade is a competency of the Commission and, obviously, member states have an input into how Europe will respond and how Europe navigates this period,” he said.
“First of all, we have to see what happens and assess it and measure it, calibrate the impacts, and then develop our response.
“But I wouldn’t do anything prematurely right now, until we see what exactly is being proposed – if something is being proposed – but I think what is essential that the European Union acts as one and will act as one,” the Taoiseach said.
“I think in unity, there is strength.”
Elon Musk, the world’s richest person and Trump’s controversial close advisor, said Monday the giant USAID humanitarian agency will be “shutting down”.
It’s part of his radical – and critics say unconstitutional – drive to shrink the US government.
Employees at the US Agency for International Development, which runs aid programs in about 120 countries, were instructed by email not to go to their offices today. Some 600 staffers found themselves locked out of their computer systems, ABC News reported.
Musk called USAID “a criminal organization” and declared “you’ve got to basically get rid of the whole thing.”
“I went over with [Trump] in detail, and he agreed that we should shut it down,” Musk said in a discussion on his X online platform.
USAID is the aid arm of US foreign policy, funding health and emergency programs in the world’s poorest regions. It is also seen as an important source of soft power for the superpower in its struggle for influence with rivals including China.
Members of Congress attempt to enter USAID pic.twitter.com/8YJSLOkEgx
— Aaron Fritschner (@Fritschner) February 3, 2025
Democrats, who hold the minority in Congress, are sounding alarm over what they say is an unconstitutional power grab by Trump and Musk.
Congress has authority over the US budget but Musk – whose so-called Department of Government Efficiency (DOGE) is not even a formal government agency – says he can decide how money is used.
Because Musk is neither a federal employee nor a government official, it remains unclear to whom he or his informal agency are accountable – other than to Trump.
The pace and intensity of Musk’s operation, which is using employees brought from his own companies, has caught opponents off guard.
In one especially tense episode, Musk’s team insisted on gaining access to the Treasury’s highly sensitive payment system, which is used for dispatching trillions of dollars a year across the entire government. It also contains the personal data on swaths of Americans.
Unable to prevent this, the top civil servant at the Treasury Department, David Lebryk, left his job on Friday, US media reported.
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