Mexico and the United States have come to a one-month deal to avoid the implementation of tariffs and prevent a potentially escalating trade conflict, which had caused a significant drop in global market values on Monday morning.

The 25% tariffs on imports from Mexico were scheduled to begin on Tuesday, despite an existing free-trade pact established by Trump during his first term, which won’t be renegotiated until 2026.

By Monday afternoon, Trump’s planned 25% tariffs on Canadian products and a 10% tariff on Chinese imports still appeared ready to proceed starting Tuesday.

Mexico’s President Claudia Sheinbaum announced that her country would deploy 10,000 National Guard troops to its northern border, while President Donald Trump agreed to take measures to reduce the flow of American firearms going into Mexico. The leaders finalized the agreement during a phone call on Monday morning.

“It was a very positive conversation where she consented to promptly send 10,000 Mexican soldiers to the border between Mexico and the United States,” Trump shared on his Truth Social account. “These troops will focus on preventing fentanyl and illegal immigrants from coming into our country.”

He mentioned that his secretaries of State, Treasury, and Commerce would collaborate with high-ranking Mexican officials on these matters during the one-month pause.

The Dow Jones Industrial Average, an important stock market index, dropped over 650 points at the start of trading before making a partial recovery, although it remained in negative territory after the announcement of the temporary hold on tariffs.

There was growing expectation that Sheinbaum was negotiating an agreement since she postponed her regular press briefing on Monday. She was greeted with cheers upon announcing the deal on X shortly thereafter.

Post-call, Sheinbaum confirmed her commitment to sending the National Guard troops to the border, while Trump agreed to address one of Mexico’s primary concerns: stopping weapon trafficking from the U.S. to criminal groups in Mexico.

“He presented several suggestions, and we reached an agreement,” she commented. “From the very beginning, I made it clear that I wanted the tariffs to be suspended.”

This last-minute agreement brings to mind events from Trump’s earlier presidency, when he used the threat of tariffs to compel Mexico into action, leading Sheinbaum’s predecessor, Andrés Manuel López Obrador, to send thousands of troops under the new National Guard to prevent migrant crossings.

Over the weekend, Trump had warned on social media that the tariffs could inflict “some pain” on American consumers. Tariffs function similarly to taxes, as retailers often pass the extra costs onto customers in the form of higher prices.

Trump has often claimed that trade tariffs would motivate countries to better manage the flow of migrants and fentanyl across their borders into the U.S.

Sheinbaum previously criticized Trump’s “defamatory” statement suggesting her administration was colluding with drug cartels and indicated a “Plan B” of retaliatory measures, potentially involving both tariff and non-tariff strategies.

She emphasized her government’s efforts in seizing over 40 tons of illegal drugs, including 20 million fentanyl doses, within the last four months in a detailed post on social media. Additionally, she pointed out that the U.S. should do more to limit the flow of weapons to Mexican cartels and to reduce drug demand among American consumers.

(This story was updated to include additional information.)