Stocks and bond yields slump after Trump hits Mexico with tariffs

Stocks were sharply lower Friday as investors feared President Donald Trump’s surprise decision late Thursday to impose tariffs on all Mexican imports, combined with the trade war with China, risks slowing economic growth.

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The S&P 500 index looks likely to end the month down 6 percent and the Dow Jones Industrial Average may close Friday with its longest streak of weekly losses since 2011.

The U.S. will impose a 5 percent tariff on incoming Mexican products until the country limits illegal immigration on the U.S. southern border, Trump announced in a tweet Thursday night.

“The announcement of the US administration imposing tariffs on all US imports from Mexico starting at 5 percent on June 10 and escalating to 25 percent by October adds uncertainty in a global environment of already elevated trade tensions,” Elena Duggar, Associate Managing Director of credit rating agency Moody’s Investor Services, said.

“New tariffs would be credit negative for the US auto sector which relies heavily on imports from Mexico. New tariffs would also raise prices for US consumers as Mexico is the US’s largest supplier of agricultural imports, including vegetables, fruits, wine and beer, and processed fruits and vegetables,” the agency said.

Ticker Security Last Change %Chg I:DJI DOW JONES AVERAGES 24907.69 -262.19 -1.04% SP500 S&P 500 2761.19 -27.67 -0.99% I:COMP NASDAQ COMPOSITE INDEX 7482.375269 -85.34 -1.13%

Meanwhile, China is planning further retaliation against U.S. import tariffs by restricting exports of rare earth minerals used in electronics and may target specific American companies according to media reports.  The trade war is already affecting Chinese economic growth with the official manufacturing purchasing managers index falling into a contraction below the 50 index level.  China’s official NBS manufacturing PMI fell to 49.4 in May, from 50.1 in April in data published Friday.

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