Donald Trump has done it again. With his latest decree that the US will impose tariffs of 5% on Mexican imports starting June 10, the president has shifted the sights of his ever-escalating global trade war. Per usual, Trump delivered the news in the form of a tweet, saying tariffs would be in place until such time as illegal migrants coming through Mexico, and into our Country, STOP.
Trump said hell boost the initial 5% tariff all the way up to 25% — in five-point increments — if people dont stop flowing over the border. This decision may ultimately boost the anti-immigration platform that will be crucial for Trumps 2020 reelection chances, but its threatening to destabilize some of the worlds biggest economies.
This is especially true since Trump is already pushing a major trade conflict with China. The US impact In the US, JPMorgan estimates that new tariffs will reduce third-quarter gross domestic product by a quarter-point, from 1.75% to 1.5%. The firm warns that a much bigger downward revision may be necessary if a corporate spending slowdown impacts hiring, which could then hurt consumer spending.
A bonus just for you: Click here to claim 30 days of access to Business Insider PRIME Theres also been ongoing speculation that Trumps recent tariffs are serving as an indirect tax on the average person. After all, when a tariff is imposed, the manufacturing company doesnt necessarily have to make up the difference on their end.
They can always pass that additional cost along to the purchaser. Experts say thats already beginning to happen with tariffs implemented last year. The impact of the 2018 tariffs has been passed on to US consumers in the form of higher prices, Chad Brown, senior fellow at the Peterson Institute for International Economics, said in a tweet on Friday.
China is NOT bearing the burden of Trumps tariffs. Jack McIntyre, a portfolio manager at Brandywine Global, shared a similar sentiment. The bottom line is this threat hurts the US economy via consumer spending getting hit, he said. The resulting uncertainty may mean more postponement in capital expenditures.
And then theres the matter of markets. With US stocks hurtling towards their worst week since their December 2018 meltdown, its clear investors are allergic to Trumps trade uncertainty. Meanwhile, in the bond market, the scared rush into Treasurys— considered to be among the worlds safest assets — which has pushed yields into dangerous territory.
. Read more: JPMorgans quant guru breaks down the markets ace in the hole for fighting Trumps trade war — and explains why stocks could surge 12% Near-term yields are currently higher than their long-term counterparts, something thats historically signaled an imminent recession,.....