Crypto Markets Rebound as Trump Delays Tariffs on Canada and Mexico

Cryptocurrency markets experienced a significant rebound after U.S. President Donald Trump announced a temporary hold on proposed tariffs targeting Canada and Mexico. The news followed a series of diplomatic agreements between the U.S. and both nations aimed at addressing issues such as illegal immigration and the flow of illicit drugs.

Diplomatic Efforts and Tariff Delays

On February 3, Canadian Prime Minister Justin Trudeau confirmed in a statement on X (formerly Twitter) that, following a phone call with Trump, the U.S. would pause the 25% tariffs on Canadian goods for at least 30 days. In response, Canada has committed to strengthening cooperation with the U.S. to combat illegal drug trafficking and immigration. This includes a $1.3 billion border security plan, which will involve appointing a "Fentanyl czar," designating drug cartels as terrorist organizations, and bolstering U.S.-Canada border enforcement with additional personnel and aerial support.

Similarly, Mexico's President Claudia Sheinbaum announced that tariffs on Mexican goods would also be paused for a month. In a statement on X, Sheinbaum said that the two leaders had reached a series of agreements and would focus on improving security and trade relations during this period. The pause comes after ongoing discussions about strengthening the land border between the U.S. and Mexico.

The Path Forward for U.S.-China Tariffs

While the tariffs on Canada and Mexico have been temporarily suspended, discussions regarding U.S.-China trade relations remain unresolved. Trump’s executive order on February 1 also imposed a 10% tariff on Chinese goods, a move that has not been retracted as of yet. According to a report from the Wall Street Journal on February 3, the U.S. government is open to negotiations, and China has proposed reinstating the Phase 1 trade deal signed in 2020. This agreement requires China to increase its purchases of U.S. exports by $200 billion over two years.

Prediction markets on platforms like Polymarket suggest a 24% chance that the tariffs on Mexico will be fully removed by March, with a 22% likelihood for Canada’s tariffs to be lifted. In contrast, the chance for China’s tariffs to be removed by next month is significantly lower, at just 9%.

Crypto Market Reaction: Recovery and Growth

The crypto market had taken a sharp downturn just a day earlier, on February 3, when Trump’s tariff announcement sent shockwaves through the global economy. Some estimates suggested that up to $10 billion in capital was liquidated from the crypto markets in response to the news. However, following the latest diplomatic developments, cryptocurrency prices have begun to recover.

Bitcoin (BTC) has surged past the $100,000 mark, rising from a low of $92,000 to $101,731, according to data from CoinMarketCap. Meanwhile, Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has climbed back to $2,880, recovering from a low of $2,451.

Market Sentiment Shifts: From Fear to Greed

The rebound in cryptocurrency prices is also reflected in the Crypto Fear & Greed Index, which tracks market sentiment. After lingering in the "fear" territory, the index has crossed into "greed" territory with a score of 72 out of 100, signaling renewed optimism among investors and traders.

As the situation continues to evolve, market participants are closely monitoring the ongoing trade negotiations and the potential impact on both the crypto and global financial markets. The rebound in cryptocurrency prices demonstrates the market's resilience, but many questions remain about the future of U.S.-China relations and the broader economic landscape.