& # 39; Mayhem & # 39; Crippling & # 39; Serenity Now & # 39; Trump's Endangered Tariffs on Mexico would spur chaos, "Wall Street warns
Associated Press
Investors already on the edge of the ongoing commercial war between the US and China have a new headache.
The financial market was thrown into disarray Friday after President Donald Trump threatened to impose tariffs from June 10 on all the goods that the United States imports from Mexico to "illegal immigration problem is being solved."
Global shares died. The Mexican peso cratered. Germany's 10-year Bund dividend scraped to the deepest below zero on record low. VIX, S & P 500's "fear meter", touched a two week height. And strategists, economists and analysts up and down Wall Street warned the worst yet to come.
"So this is no more about free and fair trade, reciprocity and protection of technological excellence," Peter Boockvar, the main investment officer of the Bleakley Advisory Group, said on Friday in an e-mail report he called "Serenity Now."
"Tariffs can be thrown around as an economic bomb for something now," he said. "Global growth levels will only continue to suffer."
The trump administration's sudden announcement comes as Washington and Beijing are locked in their own trade conflict that has been going on for over a year. Experts say the Trump threats threaten to strongly influence supply chains between the United States and Mexico – and inject a new wild card into the stock markets.
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"Despite a less serious impact on GDP, the impact on supply chains and economic activity can be significant, which means that financial markets can be significantly affected, "Nomura research analysts led by Lewis Alexander said in a note out Thursday.
Cars and capital goods are two groups that are particularly sensitive to the proposed tariffs, as they accounted for most of America's imports from Mexico last year, the analysts said. Auto shares that General Motors and Ford deleted on Friday, and a team of Deutsche Bank economists said the expected cost for US car manufacturers would be "crippling."
"With businesses already interfering with the ramp up in the US and China trade tensions, further uncertainty created by the announcement tonight may reinforce a decline in business confidence," they wrote.
Nomura.
The development knocked down stock markets, at least in the US, which was already in the midst of a gloomy run. May be marked the first negative month in 2019, and the Dow Jones Industrial Average fell for a sixth straight week.
S & P 500's "big top pattern remains in force, which, after the latest Tariff news in Mexico, has an opportunity to play further now," said Frank Cappelleri, market engineer at Instinet, to customers Friday.
He put in a note out early Friday called "Mayhem" that S & P 500 has "definitely broken down", with a downside goal of 2.650. The benchmark index has already fallen 7% from May 1, and this would mean a decrease of another 3.6% from here.
Still, the question is whether Trump's announcement is a negotiation strategy or whether the proposed tariffs will be implemented on June 10.
"May the threat of monthly escalating tariffs on Mexico be a negotiating package" Certainly, "said Sam Rines, CFO of Avalon Advisors, on clients Friday.
" It may even be the most probable result of the threat. But – even if it's just a negotiating package – there's nothing that can be ignored. The threat gradually creates uncertainty, and further cremation that already flags business investments. "
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