The Threat of Trump's Mexican Trade War Depresses Markets

The threat of US President Donald Trump to open a trade war with Mexico has slid Wall Street, with shares of automakers being among the hardest hit.

Markets in Europe were already frightened by the announcement that the United States would hit Mexico with tariffs as part of an anti-immigration measure.

The three major US markets recorded a decline of nearly 1.5%, while General Motors, which, like many manufacturers, has established in Mexico, lost 5%.

The news of the Mexican movement comes in the context of a trade war between the United States and China.

Trump announced in a tweet that tariffs on all goods from Mexico would be introduced until the country curbs illegal immigration to the United States.

As of June 10, a 5% tariff would be imposed and would slowly increase to 25% "until the problem of illegal immigration is resolved". he declares.

The tweet was followed by a statement from the White House giving more details.

Jesús Seade, Mexico's top diplomat in North America, said the proposed tariffs would be "disastrous", as badysts and investors speculated the move could trigger economic recession World.

• Trump will hit Mexico with tariffs to stop migrants

Ulrich Leuchtmann, strategist at Commerzbank, said: "US trade policy has taken a different turn in terms of quality, and the use of tariffs to achieve non-economic objectives gives the procedure a new quality."

Shares of automakers and supply chain companies were the hardest hit. Ford fell 3.4% and Fiat Chrysler 5%.

Mexico is the largest source of parts and engines in the US auto sector, with imports of $ 128 billion worth of products.

A Deutsche Bank research note stated that the tariff measure "could paralyze the sector and cause major uncertainty".

The total value of US imports from Mexico is about 350 billion dollars.

In Europe, car shares also declined, with Renault and Volkswagen falling by around 3%. The FTSE 100 index of the United Kingdom fell by about 1%, while that of Germany, Dax, was 1.7% lower and that of France, 1.4 %.

The Business Roundtable, a US-based body of US corporate executives, urged Trump to reconsider his decision.

"Imposing unilateral tariffs on Mexican imports would be a serious mistake," said the group in a statement, stressing that it "would create a major economic disruption and impose taxes on US workers, farmers, consumers and businesses ".

He also warned that this decision was jeopardizing a new trade agreement between the United States, Mexico and Canada to replace Nafta.

Farmers

The US Chamber of Commerce, which represents three million companies in the United States, has also condemned the proposed tariffs.

"These rates will be paid by American families and businesses without doing anything to solve the very real problems at the border," said Neil Bradley, policy officer.

Trump said the rates would help restore the US auto industry. He also urged companies to "go home to the United States".

Any retaliation by Mexico could put additional pressure on US farmers already affected by the US-China trade war, as well as floods and rainy weather.

Last week, the White House announced a $ 16 billion aid program for farmers, after a $ 12 billion grant in 2018, to help offset Beijing's retaliation.

Dave Salmonsen, Trade Policy Specialist of the Federation of US Agricultural Bureaus, said farmers and consumers would both suffer.

"Fresh produce crossing the border every day, the consequences on fruits and vegetables will be pretty immediate," he told the AFP news agency, adding that beer and tequila were also imported.