Markets that sleepwalked into the trade war think it will be over soon. Mexico says tariffs are already postponed.

Markets never really thought that serious trade barriers — particularly against America’s neighbors — were in the offing. Now that they’re in play, investors are still seemingly convinced that any trade war will be over soon — or before it even starts.

US stocks are off to a rough start to the week after President Donald Trump signed executive orders putting tariffs on China, Canada, and Mexico.

But the SPDR S&P 500 Trust and Invesco QQQ Trust clawed back some of their losses in early trading, down only about 1.5% after Mexican President Claudia Sheinbaum said tariffs had been delayed for a month.

ETFs that track major US stock indexes were holding up well compared to last Monday’s DeepSeek-driven freak-out.

A basket of stocks highlighted by Goldman Sachs as being particularly vulnerable to trade barriers continues to outperform a separate tariff-immune cohort since the US election, even after Friday’s swoon and downdraft to start this week:

The wisdom of the crowds on Polymarket, which received plaudits for its foresight regarding the US election, pegged the odds of tariffs on Canada and Mexico before March at around 20% through late January.

Per the platform, there’s roughly 30% and 40% likelihood that these tariffs on Mexico and Canada, respectively, are removed before March. Those numbers rise to roughly 50% and 60% for May.

“Most investors still believe that tariffs are just a cunning negotiation strategy, and they will be gone in a matter of weeks,” wrote Dario Perkins, managing director for global macro at TS Lombard. “That suggests there will be a strong inclination to buy any dip. And if that view holds, their short-term impact on the market could be rather limited.”

To borrow a line from Trump’s first term, it’s a view that “trade wars are good and easy to win.”

Perkins added that this, however, could embolden Trump to pursue ever more disruptive trade barriers that eventually leave a mark, a version of the Minskyian argument we’ve used to explain the consequences of investors’ predilection for brushing off tariff threats.

Andrew Bishop, global head of policy research at Signum Global Advisors, noted that the off-ramps to nip these trade measures in the bud may have already been paved.

“There is a general perception that no serious transactionalism has taken place between US and foreign officials, and that this perception is both inaccurate and paradoxically helpful to the prospects for a ‘deal,’ as it means the president could ‘easily’ pick among the flurry of steps Canada, Mexico, and China have already offered, and claim victory,” he wrote.

So there’s always the chance of an 11th-hour solution, or kicking of the can down the road.

“This does not go into force until February 4th,” noted Neil Dutta, head of US economics at Renaissance Macro Research. “There is time for a resolution but I am curious to see how patient markets will be.”

Of course, there are some who think this opening salvo is a significant game-changer for markets, like 22V Research’s chief market strategist, Dennis Debusschere, who penned a note titled “Ripping Up the 2025 Playbook” in reference to these trade measures.

“Before this weekend, the playbook was to fade tariff headlines,” he wrote. “Now, it will be hard for markets to stabilize UNLESS tariffs are removed.”

Lori Calvasina, head of US equity strategy at RBC Capital Markets, said tariffs were something that foreign investors were a lot more worried about than domestic investors, based on conversations with clients. The realization of tariffs could contribute to closing this concern gap by denting sentiment and the operational performance of US corporate giants.

“Post election and recent company commentary also leaves us convinced that the current iteration of tariffs presents a significant, new challenge for the c-suite to overcome, with possible adverse impacts to EPS, margins, demand, and business confidence — along with all of the positive things improved business confidence has been expected to lead to,” she wrote.