Wall Street’s main indexes fell sharply on Friday, hit by fears that President Donald Trump’s shock threat of tariffs on Mexico could prove the trigger that pushes the US into recession.
Washington will impose a 5 per cent tariff from June 10, which would then rise steadily to 25 per cent until illegal immigration across the southern border was stopped, Trump tweeted on Thursday. Mexican President Andres Manuel Lopez Obrador said he would respond with “great prudence”.
“This comes at a time when companies have to be looking at alternatives to the Chinese supply chain. Many thought Mexico would be an alternative, but now that looks in jeopardy,” said Cliff Hodgeof Cornerstone Wealth.
“The risk is that these tariffs, along with those imposed on China, push an already soft business cycle into a full-blown recession.”
Wall Street’s main indexes are down about 6.5 per cent in May, their worst performance this year and the trigger for a flood of money into the bond market that has encouraged expectations of a U.S. recession.
US Treasury yields fell to new multi-month lows, while the yield curve, as measured in the gap between three-month and 10-year bond yields, remained heavily inverted. An inversion in the yield curve is seen by some as an indicator that a recession is likely in one to two years.
The broader financial sector was under pressure, falling 0.95 per cent, while bank stocks tumbled 1.03 per cent.
U.S. carmakers and manufacturers were among the worst hit. General Motors Co dropped 4.2 per cent and Ford Motor Co 2.9 per cent, pushing the consumer discretionary sector 1.17 per cent lower.
At 11:03 a.m. ET the Dow Jones Industrial Average was down 251.00 points, or 1.00 per cent, at 24,918.88, the S&P 500 was down 26.26 points, or 0.94 per cent, at 2,762.60 and the Nasdaq Composite was