Wall Street Lunch: U.S. Tariffs Delayed On Mexico

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U.S. tariffs of 25% will be delayed for 1 month after call between presidents. (0:15) Trump says EU tariffs coming. (1:31) Stock and currency markets swing after deal. (1:43)

This is an abridged transcript of the podcast.

Don’t touch that dial. In Double Jeopardy, the scores can really change.

The tariff narrative took a swift turn this morning after a delay in the implementation of U.S. tariffs on Mexico. The move prompted buying in stocks and a reversal of the greenback against the peso and the loonie.

Mexico President Claudia Sheinbaum tweeted, “Tariffs were paused for a month from now,” following a call with President Donald Trump. Trump then confirmed the one-month delay. Mexico will send 10,000 National Guard troops to the border to combat drug trafficking, while pledging to work to prevent the trafficking of high-powered weapons into Mexico, Bloomberg reported.

The delay forced traders to quickly rethink the global trade landscape, which this morning looked like—in the words of one analyst—an escalating trade war and the worst trade shock in 50 years. While Trump initially took an extremely protectionist stance, today shows flexibility that can remove an expected drag on equities.

Goldman Sachs strategist David Kostin said—before the Mexico delay was announced—that for each 5 percentage point increase in the U.S. tariff rate, S&P 500 earnings would reduce by 1-2%.

A sustained 25% tariff on imports from Canada and Mexico would have increased the effective U.S. tariff rate by 7 percentage points from the current 3%, implying a 0.7% increase in U.S. core PCE prices and a 0.4% hit to GDP.

Still, there is plenty more tariff back-and-forth to come. Trump said tariffs on the European Union would “definitely happen” and that while there is no timeline, it would be “pretty soon.” He added that a deal with the U.K. could probably be worked out.

In trading, stocks were taking it on the chin at the open, with only Energy (XLE) seeing some support due to higher oil prices and Consumer Stocks (XLY) (XLP) and Tech (XLK) hard hit. But the major averages sharply cut losses after the Mexico delay was announced.

The Nasdaq (COMP.IND) is still seeing the most selling, down -1%, while the S&P (SP500) is off -0.5% and the Dow (DJI) is just slightly below the flatline.

The U.S. dollar reversed course against the Mexican peso (USD:MXN) and is now in the red, off -1%. The greenback, which hit a 22-year high against the Canadian dollar (USD:CAD), has lost most of its gains there.

In other asset classes, WTI crude (CL1:COM) cut most of its gains, and bitcoin (BTC-USD) went from down around -5% to up +1%.

The bond market reaction has been more measured the whole session. The 2-year Treasury yield (US2Y) is up slightly, getting closer to 4.25%, while the 10-year (US10Y) is down back around 4.50%.

That’s an indication of concern about nearer-term U.S. inflationary pressures from tariffs but longer-term worries about slowing growth.

Societe Generale FX strategist Kit Juckes says, “A U.S. economy this close to full employment isn’t going to benefit from chasing out imports because it hasn’t had the people to make the goods to offset this.”

“There is nothing about this that isn’t bad for global growth; even if it’s short-term, it’s short-term bad not just about the uncertainty it creates now but about what President Trump says next,” he added.

We want to know what you think about Trump’s tariff policies? Do you support them? What will be the most impactful outcome? Take our Seeking Alpha sentiment poll. I’ll put a link to the story where you can vote at the top of Show Notes.

Among active stocks. Tesla (TSLA) is one of the biggest S&P decliners. Auto stocks in general are falling due to tariff worries, but there is concern Tesla could be singled out. Former Canadian finance minister Chrystia Freeland said that Ottawa should retaliate against U.S. tariffs by imposing 100% tariffs on the EV maker.

Away from tariffs, IDEXX Labs (IDXX) is the biggest S&P gainer on strong results and guidance.

IDEXX said it sees 2025 GAAP EPS of $11.74 to $12.24, which assumes a stock buyback of around $1.5 billion during the year. The company expects to report revenue of $4.055 billion to $4.17 billion. Analysts were expecting GAAP EPS of $11.84 on revenue of $4.15 billion.

And Dave & Buster’s Entertainment (PLAY) gained after the company announced the appointment of Scott Ross to its board of directors. The selection is notable because Ross is the founder and managing partner of Hill Path Capital.