Dow Futures Slip 220 Points as Trump Flexes Muscle with Mexico Tariffs

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By CCN: Dow Futures slipped 220 points late Thursday after Donald Trump threatened to levy 5% tariffs on all imports from Mexico by June 10. The tariffs will rise in gradual increments to 25% by October 2019. They’ll remain in effect until further notice.

Trump announced the new tariffs hours after teasing a “major statement on the border sometime today or tomorrow.” When pressed by reporters he said:

“It will be a statement having to do with the border and having to do with people illegally coming over the border, and it will be my biggest statement so far on the border.”

The president tweeted the Mexico tariff announcement hours later and said the new tariff will gradually increase until Mexico stems the tide of illegal immigrants.

There has been a recent swell of migrants at the U.S. southern border, including 1,000 apprehended on Wednesday by the U.S. border patrol.

Mexico Tariffs Send Dow Futures Reeling

Dow futures immediately fell off over fears of the economic fallout from a new front in Donald Trump’s trade war. Dow futures traders are clearly expecting the financial consequences of the new tariff to be severe.

CNBC reports that Mexico is America’s second largest trading partner by U.S. imports. According to the Office of the U.S. Trade Representative: “U.S. goods imports from Mexico totaled $346.5 billion in 2018.”

In other words, the 5% tariff increase represents a stiff $17 billion tax hike on Americans who buy goods imported from Mexico. Furthermore, a 25% Mexico tariff will represent a whopping $86 billion loss to American businesses and consumers.

The reaction from Dow futures markets spells gloom.

Mexico Tariffs Could Be Permanent

The full White House statement clarifies:

“If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the Tariffs will be removed. If the crisis persists, however, the Tariffs will be raised to 10 percent on July 1, 2019.”

And the White House admonishes the tariff increases won’t stop there if Mexico fails to stem the tide of illegal immigration. They’re scheduled to increase to 15% on Aug. 1. Then on Sept. 1, they’ll bump to 20%. By October, they’ll sit at 25% and remain there until illegal immigration from Mexico “substantially stops.”

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