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.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 40
- The only provider to offer 24-hour pricing
Live prices on most popular markets