Investors already on edge from the ongoing trade war between the US and China are dealing with a new headache.
Financial markets were thrown into disarray on Friday after President Donald Trump threatened to impose tariffs, starting June 10, on all the goods the US imports from Mexico until the “illegal immigration problem is remedied.”
Global equities plunged. The Mexican peso cratered. Germany’s 10-year Bund yield scraped to the deepest below zero on record low. The VIX, the S&P 500’s “fear gauge,” touched a two-week high. And strategists, economists, and analysts up and down Wall Street warned the worst is yet to come.
“So this is no more about free and fair trade, reciprocity, and protection of technological expertise,” Peter Boockvar, the chief investment officer at Bleakley Advisory Group, said Friday in an emailed report he called “Serenity Now.”
“Tariffs can be thrown around as an economic bomb for anything now,” he said. “Global growth rates will only continue to suffer.”
The Trump administration’s sudden announcement comes as Washington and Beijing are locked in their own trade dispute that has been dragging on for over a year. Experts say the duties Trump is threatening could heavily impact supply chains between the US and Mexico — and inject a new wild card into equity markets.
A bonus just for you: Click here to claim 30 days of access to Business Insider PRIME
“Despite a less severe impact on GDP, the impact on supply chains and economic activity could be significant, implying that financial markets could be affected materially,” Nomura research analysts led by Lewis Alexander said in a note out Thursday.
Automobiles and capital goods are two groups particularly sensitive to the proposed tariffs as they accounted for most of the US’s imports from Mexico last year, the analysts said. Auto stocks