Global markets plunge as China trade war and Mexico tariffs fuel a ‘triple hit of bad news’ – Theron Mohamed May. 31, 2019, 04:36 AM

President Donald Trump talks with reporters before departing on Marine One for the Air Force Academy graduation ceremony, Thursday, May 30, 2019, in Washington. (AP Photo/Evan Vucci)

  • Global stocks fell on Friday after the Trump administration announced a 5% tariff on all Mexican exports to the US, rising to 25% in October if illegal immigration doesn’t fall dramatically.
  • Traders also took cover after China confirmed it has mapped out how to restrict America’s supply of rare-earth metals to hurt the US economy.
  • China also revealed its manufacturing activity contracted in May as US tariffs took a toll.
  • “Today’s triple hit of bad news has proved too much for investors to stomach,” one analyst said.
  • View Markets Insider’s homepage for more stories.

Asian and European stocks and US futures fell on Friday after the Trump administration announced tariffs on all Mexican exports to America in a bid to reduce illegal crossings at the southern border. China’s confirmation that it has planned out how to restrict America’s supply of critical rare-earth metals, and a decline in Chinese manufacturing in May, also weighed on markets.

“On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP,” the president tweeted. “The Tariff will gradually increase until the Illegal Immigration problem is remedied at which time the Tariffs will be removed.”

The tariffs will rise monthly until they reach 25% at the start of October and remain at that level “until Mexico substantially stops the illegal inflow of aliens coming through its territory,” the White House said in a statement. The duties have global implications as thousands of multinationals operate in Mexico including Ford, General Motors, Coca-Cola, IBM, John Deere, and Toyota, according to the BBC.

“Trump is going all out here,” said Jasper Lawler, head of research at London Capital Group. “The move to start a trade war on another front has shaken sentiment in an already fragile market.”

Shares in automakers that ship cars from Mexico to America were among the hardest hit as investors feared the tariffs would disrupt their Mexican operations and increase costs. Volkswagen fell 3%, Fiat Chrysler dropped 5%, and Mazda tumbled 7%. Banks BBVA and Santander, which have significant presences in Mexico, dropped around 4% and 2%.

“Coming at a time of a breakdown in talks with China, it’s another blow to bulls and we should consider further downside risks from escalation,” said Neil Wilson, chief market analyst for America starting “a fight with its neighbor and largest trading partner was not on the agenda.”

“The caprice of Trump has caught investors off guard and will weigh on investor sentiment,” he added.

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