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Well, that was unexpected. So how is this going to work with Mexico? After we just went through a process of a new trade deal, President Trump slaps a 5% tariff on all Mexican exports, and it could rise to 25% by October 1. I mean the USMCA hasn’t even been ratified yet?
The market is not going to like this one bit, especially with what is happening with China. It is nearly impossible for me to determine what the potential impact could be on the US economy or the S&P 500 earnings estimates.
It will not be good for the Auto stocks that is for sure. The US imports about $100 billion a year in vehicles from Mexico.
I can tell you that this makes me feel more nervous and concerned than China does just because it would seem to me that Trump will use tariffs as a way to impose his will. A part of me also wonders if this is nothing more than a political stunt. Remember the wall that Mexico was supposed to pay for? Well, now he can say Mexico is paying for it, or he can say I got Mexico to fix the border crossing problem without the help of Congress.
The S&P 500 futures are pointing to a decline of about 80 bps at this point, and I’m not sure how severely the market will respond to this latest round of trade news, but I can’t expect for to be positively received.
At this point, the futures are holding the lows from yesterday, which is, of course, is good, but not comforting because it also means more declines may lie ahead.
I had planned on writing an article tonight talking about several positive developments I had been noticing in the market recently. Maybe I will get the opportunity tomorrow night.
Sorry for the late and unusual commentary, but it has been an unusual day.
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