Global stocks edged lower on Friday after the Trump administration announced tariffs on all Mexican exports to America in a bid to reduce illegal crossings at the southern border. Asian and European stocks, as well as the US index futures, fell sharply in the last trading session of the month.
“On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied at which time the Tariffs will be removed”, wrote Donald Trump on Twitter.
The tariffs will rise monthly until they reach 25% at the start of October and remain at that level “until Mexico substantially stops the illegal inflow of aliens coming through its territory”, the White House said in a statement. The duties have global implications as thousands of multinationals operate in Mexico including Ford, General Motors, Coca-Cola, IBM, John Deere, and Toyota.
The automakers will suffer the biggest blow by the new duties, as the production of car and car parts is outsourced there and new tariffs will cost billions of dollars in their earnings reports.
The retailer Walmart was also seriously hurt by the new duties, as the company relies on Mexico as a central part of its supply chain.
Meanwhile, China’s confirmation that it has planned out how to restrict America’s supply of critical rare-earth metals, and a decline in Chinese manufacturing in May, also weighed on markets.
The investors’ moods were under pressure by the larger decline in production activity expectations in China. The PMI in the industrial sector in May dropped to 49.4 points, compared economists estimates for 49.9 points.
Asian markets recap
Asian stock exchanges failed to find a single direction on Friday amid disappointing data on China’s manufacturing sector.
In Japan, the blue-chip index on Tokyo Stock Exchange, Nikkei 225, fell by 1.63% to 20,601.19 points, while the Topix wiped out 1.20% of its value. The shares of carmakers were down with Mazda Motor and Nissan Motor fell to 5-year lows, declining by 7.03% and 5.39%, respectively.
In China, the mainland benchmarks Shenzhen Component and Shanghai Composite declined by 0.23% and 0.24%, respectively. In Hong Kong, the Hang Seng index wiped out its earlier gain and closed the trade, closing with 0.7% down. The moves in the region came as China’s manufacturing activity declined more than expected in May. The official manufacturing Purchasing Managers’ Index (PMI) for May came in at 49.4, versus expectations of 49.9 by economists. PMI readings above 50 indicate expansion, while those below that signal contraction.
Australian index S&P ASX 200 rose by 0.07%. The best performers were Eclipx Group Ltd (+29.48%), Lynas Corporation Ltd (+11.31%) and Evolution Mining Ltd (+5.45%), while on the flipside were Link Administration Holdings Ltd (-23.07%), Appen Ltd (+6.64%) and St Barbara Ltd (+5.88%).
South Korean index Kospi advanced by 0.14%. The stocks of Kia Motors collapsed by 4.49%.
European markets mid-session recap
European stocks tumbled at the open on Friday, resuming a midweek slump, with investors spooked by fresh trade war concerns after US President Donald Trump announced tariffs on all Mexican imports.
German index DAX 30 sank by 230 points, or 1.93%, to 11,671.83 points at 11:00 GMT. The automakers lead the free fall with Volkswagen and Daimler wiping out 4.3% and 3.4%, respectively. The stocks of financial institutions Deutsche Bank and Commerzbank were also into the red, declining by 2% and 2.2%. Chemical giant BASF wiped out 2% of its market cap, while the stocks of the pharmaceutical company Bayer declined by 2.6%.
French index CAC 40 is down by 1.57% to 5,166.49 points at mid-session trading. The stocks of Renault fell by 4.9%, while Peugeot wiped out 3% of its market cap. Financial groups Societe Generale and BNP Paribas were also deep into the red, declining by 1.1% and 1.6%, respectively. The aircraft manufacturer Airbus also sank by 1.6%.
British blue-chip index FTSE 100 fell by 1.03% to 7,143.94 points at 11:00 GMT on Friday after US President Donald Trump’s threat of tariffs on Mexico and disappointing manufacturing data from China-focused minds on the threat of a global downturn. Housebuilders fell after mortgage lender Nationwide said British house price growth had eased to its slowest in three months, pointing to the continuing impact of the Brexit process on consumer sentiment. On the mid-cap index, Wizz Air stumbled despite forecasting net profit growth for the year ahead and saying it was well-placed to tackle higher fuel costs. The shares of the low-cost carrier fell 5.6%, with traders citing a marginal annual profit miss and rising fuel costs. AIM-listed Stride Gaming surged 23% in light trading after it confirmed larger peer Rank Group was in advanced discussions to take over the company.
Wall Street pre-session recap
Stock index futures tanked on Friday morning, as investors feared President Donald Trump’s surprise threat of tariffs on all Mexico imports, amid a worsening trade war with China, could risk sending the US economy into a recession.
Around 07:20 a.m. ET, Dow Jones Industrial Average futures indicated a drop of 262 points at the open. Futures on the S&P 500 were lower by 1.2%. Nasdaq futures dropped by 1.5%. The S&P 500 was already down 5.3% this month through Thursday after trade talks fell apart with China and rhetoric on both sides worsened in May.