NEW YORK (Reuters) – U.S. stocks dropped on Friday, as the S&P 500 closed out the month with its biggest May slump since 2010, after President Donald Trump’s surprise threat of tariffs on Mexico fueled fears that a trade war on multiple fronts could lead to a recession.
Washington will impose a 5% tariff from June 10, which would rise steadily to 25% until illegal immigration across the southern border was stopped, Trump tweeted late on Thursday.
Mexican President Andres Manuel Lopez Obrador responded by urging his U.S. counterpart to back down.
“It really is applying a trade tariff to a national security issue and that is different,” said Christopher Smart, head of Barings Investment Institute in Boston.
“That is the issue and now what country is not vulnerable to tariffs or what political, diplomatic or national security issue won’t now include the threat of tariffs to resolve. So if you are an investor this is a significantly different world.”
The Dow Jones Industrial Average fell 354.84 points, or 1.41%, to 24,815.04, the S&P 500 lost 36.8 points, or 1.32%, to 2,752.06 and the Nasdaq Composite dropped 114.57 points, or 1.51%, to 7,453.15.
Both the S&P 500 and Nasdaq closed below their 200-day moving averages for the first time since March 8, seen as a strong technical support level that could presage further losses.
For the week, the Dow fell 3.01%, the S&P 500 dropped 2.62% and the Nasdaq declined 2.41%. The weekly decline was the sixth straight for the Dow, its longest weekly losing streak since 2011. For the month, the Dow fell 6.69%, the S&P 500 dropped 6.58%, the Nasdaq declined 7.93% to mark the first monthly decline of the year for each index.
Investors have grown more worried about deteriorating trade talks between the United States and