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Dow Jones down 200 points after US proposes tariffs on Mexican goods

The Dow Jones is plummeting after the US announces possible new tariffs on Mexican imports.

The Dow Jones is tumbling after US President, Donald Trump, announced that the US is threatening to place a 5% tariff on Mexican imports starting on June 10. This comes just days after the US was close to advancing a new trade pact, the US-Mexico-Canada Agreement (USMCA).

Why is Trump threatening to impose tariffs on Mexican goods?

Trump said in a Twitter post that the tariffs on Mexican imports are meant to deter Mexican undocumented immigration into the US.

‘The Tariff will gradually increase until the illegal immigration problem is remedied at which time the Tariffs will be removed,’ tweeted Trump.

This latest action by the Trump Administration is worrying investors who are already concerned about US tariffs on Chinese goods.

Ed Mills, public policy analyst at financial services firm Raymond James, wrote in a note to clients that the surprise tariffs on Mexico could also affect the US-China trade negotiations.

‘We view this action as further deteriorating the US-China trade fight. Chinese officials have stated their concern about the reliability of President Trump as a trading partner. These tariffs were announced the same day as significant advancement of the USMCA. If China does not believe a deal will stick, why negotiate?’, noted Mills.

How would the tariffs on Mexican imports affect US businesses?

The US tariffs on Mexican products could hit the US auto industry hardest. US government trade data show that US carmakers imported $59.4 billion in auto parts from Mexico in 2018.

Matt Blunt, president of the American Automotive Policy Council, believes that the new tariffs will diminish any possible benefits if the USMCA is ratified. He also predicts that the tariffs will raise costs in the auto industry.

‘The imposition of tariffs against Mexico will undermine its [USMCA’s] positive impact and would impose significant costs on the US auto industry,’ said Blunt.

Investors will monitor the Dow Jones to see how this latest tariff dispute is resolved.

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