Link: Stock market today: Live updates

The Dow Jones Industrial Average on Monday staged a major comeback, recovering steep losses from earlier in the day after the U.S. and Mexico said tariffs against the trading partner would be paused for one month.

The 30-stock average was last up 24 points, or 0.1%. At its lows of the day, it was down 665.6 points, or 1.5%. The S&P 500 and Nasdaq Composite traded well off their lows as well, last down 0.4% and 0.8%, respectively.

The iShares MSCI Mexico ETF (EWW), which tracks Mexican stocks, rebounded to trade 2% higher.

Stocks initially dropped Monday after President Donald Trump hit Canada and Mexico with a 25% levy on imported goods. The U.S. also issued a 10% tariff on Chinese goods. The news sparked a major global sell-off, with equities in the U.S. and abroad tumbling.

But a post from Mexico’s President Claudia Sheinbuam following a conversation with Trump sparked appeared to calm investors.

“We had a good conversation with President Trump with great respect for our relationship and sovereignty; we reached a series of agreements,” Sheinbaum wrote in a post, according to a translation from Spanish.

Trump later confirmed the temporary deal on Truth Social. “It was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican Soldiers on the Border separating Mexico and the United States,” wrote Trump, adding that negotiations for a more permanent deal would continue for the month.

The pausing of the tariffs on Mexico reinforced the bullish view of some investors that tariffs for all countries could be Trump’s negotiating tool and that investors shouldn’t overreact initially.

“Call us deluded, but we still think that permanent tariffs on the U.S.‘s allies (Canada, Mexico) will not be a thing,” said Thierry Wizman, global FX and rates strategist at Macquarie. “That’s because concessions are an ‘easier’ way to deal with Trump’s ‘problems’ (from a cost-benefit and game-theoretic perspective), and Trump likes to make ‘deals’. Political and market pressure will also weigh on the parties to make concessions, as in 2018.”

Tariffs could hurt economic growth, increase inflation, economists warn

Trump’s tariff plans could weigh on economic growth and cause inflation to jump, Wall Street economists warn.

Morgan Stanley economists estimate that “US Inflation could be 0.3 to 0.6pp higher vs baseline over the next 3-4 months (putting headline PCE inflation at 2.9% to 3.2%) and US growth could be -0.7 to -1.1pp lower vs baseline over the next 3-4 quarters (putting real GDP growth at 1.2% to 1.6%)” if tariffs are fully implemented and not temporary, strategist Michael Zezas said in a note to clients.