President Donald Trump said on Friday that the United States and Mexico have signed an agreement to avoid tariffs that were scheduled to go into effect on Monday.
Trump said that Mexico in return has agreed to take "strong measures" to stop illegal immigration coming through the U.S. southern border.
In a joint declaration issued by the two countries, Mexico agreed "take unprecedented steps to increase enforcement to curb irregular migration." This includes the deployment of Mexico's national guard throughout the country with priority given to its southern border in order to slow migration from Central America.
Migrants crossing the U.S. southern border to seek asylum will be sent back to Mexico, where they will await the outcome of their asylum applications. Mexico said it will offer jobs, health care and education to those asylum seekers.
The U.S. said it would accelerate decisions on asylum claims and finish removal proceedings "as expeditiously as possible."
Last week, Trump threatened to impose 5% tariffs on all Mexican imports starting June 10 if Mexico didn't do more to stop illegal immigration. Those tariffs were set to gradually increase to 25% over the coming months if Mexico did not meet the White House's demands.
Trump has made cracking down on immigration a central priority of his administration, but his agenda has largely been frustrated by court battles and opposition in Congress, where Democrats control the House of Representatives.
The president was agitated by conservative radio commentary about a surge in border crossings, and immigration hawk Stephen Miller pushed him to use tariffs as a way to put pressure on Mexico. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer, who normally have starkly different economic views, both opposed imposing tariffs on Mexico.
Trump's abrupt decision to target Mexico shook markets, which were already facing uncertainty over the escalating trade war between the U.S. and China.
The Dow dropped 3% the week ending May 31, posting its sixth weekly loss and its longest losing streak since 2011. Trump's tariff threat had sent the peso reeling against the dollar and put pressure on automakers such as GM, Ford and Fiat which produce cars in Mexico.
The U.S. Chamber of Commerce was considering its legal options over the planned tariffs, and Senate Republicans also largely opposed Trump's move to unilaterally target Mexico.
Amid concerns that Trump was opening another trade war, Federal Reserve Chairman Jerome Powell said on Tuesday that 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."
The Dow closed up on Friday, posting its best week since November, on the hope that the Federal Reserve would cut interest rates.
Mexico President Andres Manuel Lopez Obrador had quickly signaled that he was willing to cut a deal to avoid tariffs by tightening immigration controls.
Mexican and U.S. officials met in Washington this week to discuss the border and Trump indicated that there was a good chance tariffs would be averted.
In a Twitter post earlier on Friday, Trump said Mexico would need to start purchasing farm and agricultural products "at very high levels." It wasn't clear if an agreement was reached on agriculture. It was not included in the joint declaration issued by the two countries, posted in full below.
Trump said Saturday morning that Mexico had agreed to begin immediately buying "large quantities" of agricultural goods from U.S. farmers.
-- CNBC's Fred Imbert contributed to this report
U.S. DEPARTMENT OF STATE
U.S.-Mexico Joint Declaration
The United States and Mexico met this week to address the shared challenges of irregular migration, to include the entry of migrants into the United States in violation of U.S. law. Given the dramatic increase in migrants moving from Central America through Mexico to the United States, both countries recognize the vital importance of rapidly resolving the humanitarian emergency and security situation. The Governments of the United States and Mexico will work together to immediately implement a durable solution.
As a result of these discussions, the United States and Mexico commit to:
Mexican Enforcement Surge
Mexico will take unprecedented steps to increase enforcement to curb irregular migration, to include the deployment of its National Guard throughout Mexico, giving priority to its southern border. Mexico is also taking decisive action to dismantle human smuggling and trafficking organizations as well as their illicit financial and transportation networks. Additionally, the United States and Mexico commit to strengthen bilateral cooperation, including information sharing and coordinated actions to better protect and secure our common border.
Migrant Protection Protocols
The United States will immediately expand the implementation of the existing Migrant Protection Protocols across its entire Southern Border. This means that those crossing the U.S. Southern Border to seek asylum will be rapidly returned to Mexico where they may await the adjudication of their asylum claims.
In response, Mexico will authorize the entrance of all of those individuals for humanitarian reasons, in compliance with its international obligations, while they await the adjudication of their asylum claims. Mexico will also offer jobs, healthcare and education according to its principles.
The United States commits to work to accelerate the adjudication of asylum claims and to conclude removal proceedings as expeditiously as possible.
Both parties also agree that, in the event the measures adopted do not have the expected results, they will take further actions. Therefore, the United States and Mexico will continue their discussions on the terms of additional understandings to address irregular migrant flows and asylum issues, to be completed and announced within 90 days, if necessary.
Ongoing Regional Strategy
The United States and Mexico reiterate their previous statement of December 18, 2018, that both countries recognize the strong links between promoting development and economic growth in southern Mexico and the success of promoting prosperity, good governance and security in Central America.
The United States and Mexico welcome the Comprehensive Development Plan launched by the Government of Mexico in concert with the Governments of El Salvador, Guatemala and Honduras to promote these goals. The United States and Mexico will lead in working with regional and international partners to build a more prosperous and secure Central America to address the underlying causes of migration, so that citizens of the region can build better lives for themselves and their families at home.
Correction: A previous version of this story said the U.S. Chamber of Commerce was considering suing the administration. U.S. business groups more broadly were considering that option.