Stocks opened sharply lower Friday with investors fearing that 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 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 tariff will go into effect on June 10, Trump said in a tweet late Thursday, while threatening to raise it further “until the Illegal Immigration problem” is resolved. On July 1 the tariff could rise to 10 percent; on Aug. 1 it could rise to 15 percent; and on Oct. 1 it could climb to 25 percent.
The benchmark U.S. S&P 500 index now looks likely to end down for the month for the first time since December and May could be the third worst month for U.S. stocks since the US credit rating downgrade in August 2011.
“If this is implemented it will be a serious downside risk to the U.S. economy,” Torsten Slok, economist at Deutsche Bank said. “Looking carefully at the trade data between the U.S. and Mexico shows that 67 percent of all imports from Mexico are related-party trade which is another way of saying intra-company trade. What this means is that U.S. companies are using Mexico for production. Put differently, most of the trade between Mexico and the U.S. is the global supply chain. And the trade data further shows that the biggest import categories from Mexico to the U.S. are cars and car parts and trucks and buses.”
Meanwhile, China is