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.
Dow futures drop 220 points after Trump says he will impose 5% tariffs on Mexican imports
— CNBC Futures Now (@CNBCFuturesNow) May 31, 2019
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."
President Trump: "We're going to be having a major statement on the border sometime later today or tomorrow." pic.twitter.com/NUns5aNQE1
— The Hill (@thehill) May 30, 2019
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.
....at which time the Tariffs will be removed. Details from the White House to follow.
— Donald J. Trump (@realDonaldTrump) May 30, 2019
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.
Amazing how we went from “Mexico is going to pay for the wall” to “Americans are going to pay more for products from Mexico” real quick.
— Tony Posnanski (@tonyposnanski) May 30, 2019
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."