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Stocks Slide As U.S. Threatens Tariffs on Mexico

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MAY 31, 2019 – President Trump announced the U.S. would start imposing tariffs on Mexican imports starting June 10. The move came as part of an effort to pressure Mexico into curbing the flow of migrants to the southern border.

Starting June 10, tariffs of 5% will take effect on all Mexican imports. By October 1st, import duties will rise to 25% if the U.S. isn’t satisfied with Mexico’s response.

The new surprised Wall Street. The Administration has eased tensions with its closest trade partners as of late. Just a few weeks ago, the U.S. delayed tariffs decisions on car imports from the E.U. and Japan.

Additionally, the White House has been rallying support for the USMCA agreement to pass the legislature. It’s unclear how the tariffs will affect the ratification of the agreement.

The statement immediately influenced markets. DJIA futures were down over 1.1% in pre-market trading, and S&P 500 futures fell over 1%. Mexico has a strong automobile manufacturing sector, so auto stocks fell significantly on the news. Shares of Honda, Toyota, and Mazda suffered significant losses on the Tokyo Stock Exchange.

The Mexico tariffs create another headwind for the U.S. economy. Wall Street lowered its GDP forecasts after  China talks went south, and Mexico tariffs could depress GDP even further.

 

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