Saturday, 1 June 2019

Markets fall as Trump raises tariff on Mexican imports

Markets fell on Friday.

The S&P 500 tumbled 1.3 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 plunged 1.6 percent.

Investor sentiment took another hit after US President Donald Trump announced late on Thursday that the US would impose a 5 percent tariff on all goods from Mexico until that country stops the flow of illegal immigrants into the US. Tariffs will rise in steps up to 25 percent subsequently “unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory,” said Trump.

The move on Mexico added to trade tension between the US and China that continues to escalate, with Hu Xijin, the editor of the Global Times, writing that “China will take major retaliative measures against the US placing Huawei and other Chinese companies on Entity List”.

John Bellows, a portfolio manager at Western Asset Management, said that while the economic impacts from the trade tensions are likely to be transitory and manageable, “if sentiment continues to deteriorate then that itself can become a more serious issue”.

Tom Essaye, founder of Sevens Report Research, said that foreign governments could choose to “simply wait Trump out given we’re 19 months from an election”. That would increase the chances of a recession, he added.

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