Donald Trump, United States president has caused another stir in the stock market with his recent tariff threat on Mexico. The threat plunged the stock market into its worst May since 2010. Trump announced in the tweet that he will be imposing 5 percent tariff on imports from Mexico as it aims at putting an end to the influx of migrants across the US border.
Notably, Mexico is a strategic and one of the biggest partner of the united states and many of its firms. The firms include Ford (F) and Walmart (WMT), that rely on the country as a central part of their supply chains. Mexico is also a regional manufacturing hub for Japanese, South Korean and German automakers that assemble cars in the country and ship many of them to the United States.
Car manufacturers shares such as Mazda (MZDAF), plunged more than 7%, while losses for Toyota (TM), Honda(HMC), Nissan (NSANF) and Volkswagen was over 3%.
Also, the threat led to a stock market slump that saw Asia’s Japan’s Nikkei (N225) slumped by 1.6%, while South Korea’s KOSPI (KOSPI) was down also. In Europe, the market opened lower, Britain’s FTSE 100 index fell 0.8%, stocks in Germany shed 1.3%, and in France, they fell by 1%.
The effect of the loss is expected to extend to the united states according to stock futures. Expectedly, the dow is envisaged to fall 230 points or 0.9%, when markets open and S&P 500 is tracking similar losses, while the Nasdaq could see fall of 1.1%.
A White House release noted that the tariff will take effect as from June 10 and will remain until illegal immigrants coming through Mexico into the US is stopped. In addition, the white house noted that the tariff will continue to increase until the illegal immigration problem is solved.
Per the white house, it will increase from 5% to 10% by July 1 if Mexico fails to comply. And will see an increase to 15 and 25 percent in subsequent months if necessary caution is not taken.
The recent action of trump continues the trade war that litters the international arena in recent time. China and other countries are expected to respond to this in their own measure.