President Donald Trump tours the area around the U.S.-Mexico border wall in Calexico, California, U.S., April 5, 2019.
Kevin Lemarque | Reuters
Stock futures indicated that the Dow Jones Industrial Average would open more than 100 points higher Monday in the wake of President Donald Trump’s decision to suspend planned tariffs against Mexico.
Trump announced on Friday that he would not impose 5% tariffs on Mexican exports, after Mexico agreed to strengthen immigration enforcement.
But Komal Sri Kumar, president of Sri-Kumar Global Strategies, thinks this boost will be short lived.
“There is still uncertainty around the treaty because the president can still impose tariffs if Mexico doesn’t comply with the deal,” Kumar said. “What does this mean? It means that, if the U.S. feels Mexico isn’t doing enough to stop immigration into the U.S., tariffs will be imposed. My feeling is this is going to happen sometime in the next few months.”
On Friday, the Dow closed 263.28 points higher at 25,983.94 to post its best week since November on hopes that the Federal Reserve would move to slash interest rates after job numbers came in lower than expected.
Job creation slowed dramatically with payrolls up just 75,000 in May, far below the consensus forecast of 180,000. It was the second time in four months that payrolls increased by less than 100,000.
Trumps tariff threat against Mexico had rattled markets, which were already facing uncertainty over the escalating trade war between the United States and China.
Dan Russo, chief market strategist at Chaikin Analytics, said in a note the deal alleviates “one of the overhangs on the market coming into the week.”
But “the simple fact remains that headlines are likely to continue to play on investors emotions. If we take a step back and view the market through a wider lens, we will see that over the course of the past year, the S&P 500 has essentially been in a large trading range,” Russo said.
Federal Reserve Chairman Jerome Powell said last week the central bank is “closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion.”