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Investing.com - U.S. stocks headed higher Monday as U.S. President Donald Trump suspended plans to implement tariffs on Mexico and showed confidence that similar tactics with China would also prove successful, while a wave of mergers and acquisitions also boosted bullish sentiment
The Dow Jones gained 164 points, or 0.6%, to 26,170.5 points by 9:35 AM ET (13:35 GMT), while the S&P 500 rose 19 points, or 0.7%, 2,794.30 points and the tech-heavy Nasdaq Composite traded up 83 points, or 1.1%, at 7,502.38 points.
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Trump cancelled the planned implementation of 5% tariffs on all Mexican goods that was due to go in effect Monday as he claimed that “there is now going to be great cooperation between Mexico and the USA”.
The fact the president was willing to remove tariffs caused some speculation that a similar deal could be made with China.
“The assumption here is that this move demonstrates the pragmatic nature of U.S. trade policy and raises expectations that Presidents Trump and Xi could find some room for accommodation when they meet at the G20 summit on June 28-29,” Chris Turner, global head of strategy at ING, said, warning that markets would likely still need to see “clear signs of improvement”.
Trump made clear on Monday that he could return to tariff threats if the Mexican Congress did not approve the deal reached last week.
The president also insisted that the deal on immigration with Mexico was made precisely because he had threatened tariffs, although other published reports over the weekend said that there was little new in the deal and that Mexico and the U.S. had agreed to many of the terms months ago.
“If we didn’t have tariffs, we wouldn’t have a deal with Mexico,” Trump said in a phone interview with CNBC.
Trump also claimed that the tariff tactic would ultimately work with China. Beijing is “going to make a deal because they’re going to have to make a deal,” he said, claiming that “China is getting absolutely decimated” by companies leaving the world’s second-largest economy in order to avoid tariffs.
Risk assets have been roiled by fears that escalating trade tensions could potentially lead to a global recession. G20 finance leaders who met over the weekend warned that intensifying trade and geopolitical tensions were still the biggest risk to the stabilization of global growth.
But increasing bets that the Federal Reserve will be required to step in as promised to support the U.S. economic expansion have led to a renewed bout of risk appetite. Worse-than-expected job creation and easing wage inflation boosted those expectations last Friday, leading to Wall Street’s best weekly performance since the end of last year.