Asia markets trade higher as Trump stands down on Mexico tariff threat

Stocks in Asia traded higher on Monday morning after U.S. President Donald Trump’s announcement last week that tariffs would not be slapped on Mexican goods.

Japan’s Nikkei 225 jumped 1.15% in early trade, while the Topix index gained 1.01%. Data on Monday showed that Japan’s economy grew at a slightly higher annualized rate than initially estimated —2.2% in the January to March period, as compared to economists’ median forecast of 2.1% growth in a Reuters poll.

South Korea’s Kospi also rose 0.63%, with shares of chipmaker SK Hynix gaining around 1%. 

Autos in both markets had a relief rally on the news that Trump had withdrawn his tariff threat on Mexican goods. They had initially tumbled when the levies were announced. 

South Korea’s Kia Motors surged as much as 3.28%, while Japan’s Toyota bounced 1.23%, and Nissan jumped 1.33%. Mexico is used as a production base by many Japanese automakers.

Meanwhile, markets in Australia are closed on Monday for a holiday.

Asia-Pacific Market Indexes Chart

Trump announced last Friday that the U.S. and Mexico reached a deal to avoid the implementation of tariffs, originally set to kick in on Monday. In return, he said, Mexico agreed to take “strong measures” to strengthen immigration enforcement.

The latest development comes as the U.S. remains locked in a trade war with China as the two economic powerhouses hit an impasse in negotiations.

U.S. Treasury Secretary Steven Mnuchin, who has been among the lead negotiators involved in trade talks with China, told CNBC on Sunday that Trump will decide on whether to implement more tariffs on China after the American leader meets with Chinese President Xi Jinping later in June.

“We’re going to need to see action, and President Trump is going to need to make sure he’s clear that we’re moving in the right direction to a deal,” Mnuchin told CNBC. “The president will make a decision after the meeting.”

Trump has previously indicated he expects to plan his next trade moves after the G-20 meeting in Japan.

Meanwhile, a drastic slowdown for jobs creation in May increased the odds that the U.S. would go on an easier monetary policy. Nonfarm payrolls were up by 75,000 in May — the second time in four months that the figure increased by less than 100,000. Economists surveyed by Dow Jones had been looking for a gain of 180,000.

Concerns over the potential impact of U.S. trade policy and signs of a slowing American economy have raised expectations that the Federal Reserve would slash interest rates.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.697 after declining from levels above 97.6 last week.

The Japanese yen traded at 108.46 against the dollar after touching levels below 108.0 last week, while the Australian dollar changed hands at $ 0.6998 following highs above $ 0.700 seen in the previous trading week.

— Reuters, along with CNBC’s Fred Imbert and Everett Rosenfeld, contributed to this report.

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