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Stock Market Reels as Trump Doubles Down on Mexico Threats

Stock Market Reels as Trump Doubles Down on Mexico Threats

Donald Trump

President Trump launched a bombshell on the stock market when he threatened Mexico tariffs, sending stocks tumbling. | Source: Brendan Smialowski / AFP

By CCN: The stock market is continuing to plunge. That’s because of the U.S.’ whipsaw approach to trade negotiations. Just yesterday, Vice President Pence visited Canada to promote the new USMCA trade deal which is set to replace NAFTA. He assured folks that Congress would vote for its approval this summer. It seems he forgot to check in with his boss, though.

Trump launched a bombshell on the stock market later that evening. On Twitter, he declared that the U.S. will slap Mexico with a new tariff unless they slow the flood of undocumented migrants. Administration backers claim this is a separate issue from the USMCA trade deal. But the markets aren’t buying it, or much of anything. Stocks have been slumping all day, adding to big losses from earlier in the week. At the end of the day, the Dow was off more than 300 points, while the S&P 500 shed 1.3% of its value.

Dow Chart

The Dow is down for another week. | Source: Yahoo Finance

Auto Companies Caught in the Headlights

Trump’s tariff threats were a direct hit to major auto companies with exposure to Mexico.

In order not to pay Tariffs, if they start rising, companies will leave Mexico, which has taken 30% of our Auto Industry, and come back home to the USA. Mexico must take back their country from the drug lords and cartels. The Tariff is about stopping drugs as well as illegals!

— Donald J. Trump (@realDonaldTrump) May 31, 2019

The head of the National Association of Manufacturers, Jay Timmons, was not amused. He said:

“Intertwining difficult trade, tariff and immigration issues creates a Molotov cocktail of policy, and America’s manufacturing workers should not be forced to suffer.”

Not surprisingly, auto stocks have suffered in Friday’s trading. Ford stock was down 3%, General Motors almost 4%, and Tesla by 1.5% in Friday afternoon trading.

Morgan Stanley Warns of ‘Slobalization’

The market’s fear isn’t limited to just auto stocks. As Morgan Stanley put it, tariffs are threatening to turn globalization into “slobalization”:

Tariffs are probably the most visible contributor to dragging globalization, or “slowbalization,” according to Morgan Stanley

— Bloomberg Markets (@markets) May 30, 2019

Any Hope on the Horizon?

As of this writing, the stock market is set to finish May with a 6% drubbing. That’s its worst month since December.

Not everyone is expecting disaster though. Morgan Stanley’s CEO is still optimistic on the market, thinking that we aren’t about to collapse this summer. There are reasons for optimism. Unemployment is low, consumer confidence is high, and recent GDP figures remain strong.

One thing is for certain. As Wall Streeters start heading out to their beach houses for their summer vacations, they’ll be tethered to their phones watching their stock market apps.

About The Author

Ian Bezek

I’ve been trading stocks and options for more than a decade. Ex-hedge fund analyst for three years. Currently in Colombia watching football and enjoying the weather.

This article was edited by Gerelyn Terzo.

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