Wall Street slumps over Trump’s Mexico tariffs

May 31, 2019

Stocks on Wall Street dropped on Friday after US President Donald Trump announced plans to impose 5% tariffs on Mexican goods in response to uncontrolled migration over the US-Mexico border.

The Dow Jones Industrial Average ended the day 1.4% down, with stocks having dropped 6.7% over the course of May, the first negative month of 2019. The SP 500 slumped 1.3% and the Nasdaq Composite Index was down 1.5% at the end of trading.

Read more: China retaliatory tariffs on US goods come into force

Trump’s announcement also caused the Mexican peso to tumble against the dollar. The peso lost as much as 3.4% at one point, its worst single-day loss since October. It was down 2.65% at 19.6485 per dollar.

The yield on the 10-year Treasury Bond sank to 2.13%, its lowest level since mid-2017, as investors fled to safer investments.

Auto industry affected

The new US trade war front is hitting the automotive industry particularly hard, with General Motors and Fiat Chrysler each experiencing a 4% drop in their share price. Many American automakers import vehicles and parts into the US from Mexico.

Read more: One-third of EU firms hit hard by US-China trade war

“The auto sector, and the 10 million jobs it supports, relies heavily upon the North American supply chain and cross border commerce to remain globally competitive,” the Alliance of Automobile Manufacturers said. The group represents companies that account for some 70% of all cars and light trucks sold in the US.

“Any barrier to the flow of commerce across the US-Mexico border will have a cascading effect — harming US consumers, threatening American jobs and investment and curtailing economic progress.”

Trump’s tariffs and who they target

Solar panels and washing machines

The first round of tariffs in 2018 were on all imported washing machines and solar panels — not just those from China. A study by economists from the Federal Reserve Bank of New York, Columbia University, and Princeton University found that the burden of Trump’s tariffs — including taxes on steel, aluminum, solar panels falls entirely on US consumers and businesses who buy imported products.

Trump’s tariffs and who they target

China hike

On Friday May 10, 2019 President Donald Trump imposed sanctions on $200 billion (€178 billion) worth of Chinese goods. The move rasied tariffs from 10% to 25% on a range of consumer products, including cell phone, computers and toys. China’s Commerce Ministry said it “deeply regrets” the US decision.

Trump’s tariffs and who they target

Issues with the EU

In April 2019, the United States said it wanted to put tariffs on $11.2 billion worth of goods from the EU. The list includes helicopters and aircraft from Airbus as well as European exports like: famous cheeses like Stilton, Roquefort and Gouda, wines and oysters, ceramics, knives and pajamas.

Trump’s tariffs and who they target

EU fights back

The EU imposed import duties of 25% on a $2.8 billion range of imports from the United States in retaliation for US tariffs on European steel and aluminum. Targeted US products include Harley-Davidson motorcycles, bourbon, peanuts, blue jeans, steel and aluminum.

Trump’s tariffs and who they target

European automakers next?

May 17, 2019 is the deadline for President Trump to decide on imposing tariffs on vehicle imports from the EU. According to diplomats, Germany, whose exports of cars and parts to the United States are more than half the EU total, wants to press ahead with talks to ward off tariffs on automakers Volkswagen, Mercedes and BMW.

Trump’s tariffs and who they target

India not exempt

India, the world’s biggest buyer of US almonds, on June 21, 2018 raised import duties on the nuts by 20% and increased tariffs on a range of other farm products and US iron and steel, in retaliation for US tariffs on Indian steel. Trump said last month that he would end preferential trade treatment for India, which would result in US tariffs on up to $5.6 billion of imports from India.

Trump’s tariffs and who they target

North American neighbors in tariff spat

Mexico on June 5, 2018 imposed tariffs of up to 25% on American steel, pork, cheese, apples, potatoes and bourbon, in retaliation for US tariffs on Mexican metals. While to the north, Canada on July 1 imposed tariffs on $12.6 billion worth of U.S. goods, including steel, aluminum, coffee, ketchup and bourbon whiskey in retaliation for US tariffs on Canadian steel and aluminum.