Trump pauses tariffs on Mexico

Good morning. Here's what happened overnight and what you need to know today.

1.

Tariff siesta: US President Donald Trump paused new tariffs on Mexico for a month after the country agreed to deploy 10,000 National Guard troops to curb drug trafficking, particularly fentanyl. Following a call with Mexican President Claudia Sheinbaum, both leaders announced the deal on social media. Sheinbaum said the agreement also includes a US pledge to combat high-powered weapons trafficking into Mexico. The delay allows further negotiations, led by secretary of state Marco Rubio, treasury secretary Scott Bessent and commerce secretary Howard Lutnick. Trump also spoke with Canadian Prime Minister Justin Trudeau and planned to do so again later today. Global markets fell on Monday, with the S&P 500 dropping as much as 1.93% before rebounding after the tariff pause, trading 0.41% lower in the late afternoon. Over the weekend, Trudeau vowed 25% retaliatory levies, while Mexico had yet to detail its response. A senior Canadian official told the NYT he was sceptical about securing a similar reprieve. (Capital Brief)(Donald Trump post)(Claudia Sheinbaum post)(NYT)

2.

Beijing’s Bid: Beijing is preparing a trade proposal for the Trump administration to try to prevent further tariff hikes after the US imposed 10% tariffs on Chinese imports, The Wall Street Journal reported. The plan aims to revive an unfulfilled 2020 trade deal, which required China to buy USD200 billion in US goods over two years but met only 58% of that target. According to sources, Beijing may offer more US investments, a commitment not to devalue the yuan and reduced fentanyl precursor exports. It is also reportedly willing to treat TikTok as a commercial matter, allowing ByteDance to negotiate with US investors. Trump’s 10% tariffs on China—compared to 25% on Canada and Mexico and a threatened 60% on Chinese goods – has been interpreted as his openness to talks. It comes amid a review of US-China economic ties, due in April, which could lead to proposals of higher tariffs and broader tech restrictions. (Capital Brief)(WSJ)

3.

TikTok money: US President Donald Trump has signed an executive order directing the Treasury and Commerce Departments to create a sovereign wealth fund, with commerce secretary nominee Howard Lutnick saying it may be used to facilitate the sale of TikTok. It is unclear how the fund, which Trump said would be "the greatest sovereign wealth fund of them all," will be funded. The text of the document Trump signed was not immediately available. (Reuters)(Bloomberg)

4.

Fee squeeze: Vanguard announced its largest-ever round of fee cuts, reducing expense ratios by 1 to 6 basis points across 87 funds, including US and overseas index trackers and actively managed stock and bond funds. The USD10 trillion asset manager estimates the cuts will save clients USD350 million in 2025. The reductions affect 168 share classes, with nearly 40% impacting bond funds, the FT reported. After the cuts, Vanguard’s actively managed bond funds will have an average expense ratio of 0.10%, while its index bond funds will average 0.05%, compared to industry averages of 0.44% and 0.08%, respectively, according to Morningstar Direct. The move by the second-largest money manager behind BlackRock, increases pressure on competitors, especially smaller active managers with higher fees who have been losing investors to lower-cost alternatives. The firm attracted USD335 billion in net inflows in 2024, and CEO Salim Ramji has been prioritising growth in active fixed income, citing inefficiencies and high prices. (FT)

5.

USAID unmade: Elon Musk said President Donald Trump agreed to shut down the US Agency for International Development (USAID). On Monday, USAID headquarters in Washington was blocked off with security tape and guards, and staff were told to stay out, AP reported. More than 600 employees were locked out of agency systems overnight and the USAID website went offline Saturday, staffers told the agency. Musk, leading Trump’s Department of Government Efficiency, said the agency was “beyond repair” and compared it to a “ball of worms.” The Trump administration has already frozen foreign assistance, leading to layoffs and program shutdowns. Two USAID security officials were placed on leave after refusing DOGE access to classified material. Democratic lawmakers protested, arguing Trump lacks authority to close USAID without congressional approval. In a Sunday post on X, Musk wrote: “USAID is a criminal organization. Time for it to die.” Later that day Trump said: “It’s been run by a bunch of radical lunatics. And we’re getting them out.” (AP)(The Hill)

6.

Ontario unlinks: Ontario will cancel a USD100 million contract with Elon Musk’s Starlink in response to US tariffs, premier Doug Ford announced. The deal, signed in November, was meant to provide satellite internet to 15,000 remote households. Ford said he would be “ripping up the province’s contract with Starlink” and that “Ontario won’t do business with people hell-bent on destroying our economy.” Canada has announced several retaliatory measures since US President Donald Trump announced 25% tariffs on Saturday, including matching 25% tariffs. Canadian provinces are removing American drinks from stores and US companies are being banned from some provincial government contracts. “Maybe Elon Musk can call his buddy. He is part of the Trump team,” Ford said, adding that US firms would lose “tens of billions of dollars in new contracts every year from Ontario alone.” Starlink has about 400,000 active users in Canada. (FT)

7.

SoftBanked AI: SoftBank Group CEO Masayoshi Son and OpenAI CEO Sam Altman agreed to form SB OpenAI Japan, a joint venture to provide AI services to corporate customers. The venture will be co-owned by OpenAI and a SoftBank-affiliated company. SoftBank will also pay USD3 billion annually to use OpenAI’s technology across its businesses. It comes as SoftBank considers investing up to USD25 billion in OpenAI, on top of its USD15 billion commitment to Stargate, the joint AI initiative with OpenAI and Oracle in the US. Son’s increased backing of OpenAI follows a period of retrenchment after setbacks in SoftBank’s tech portfolio. Son and Altman met with Japanese Prime Minister Shigeru Ishiba on Monday. (Reuters)

8.

Rate wait: Federal Reserve Bank of Atlanta President Raphael Bostic said he wants to wait “a while” before cutting interest rates again, citing uncertainty over the US economy’s direction. Speaking at a Rotary Club of Atlanta event, Bostic said he wants to assess the impact of last year’s 100-basis-point reduction, adding, “Depending on what the data are, it might mean that we are waiting for a while.” His remarks were his first public comments since the Fed held its benchmark rate steady at 4.25% to 4.5% last week, following multiple rate cuts in 2024. Last week, Fed Chair Jerome Powell also signalled no rush to lower rates, amid strong economic data but uncertainty over President Donald Trump’s policies on tariffs, immigration taxation and regulation. (Bloomberg)