This morning, analysts are painting a picture of a global market under pressure from an existing central trade war between superpowers, and a brand-new trade conflict announced by the U.S. president this morning.
“U.S. stock futures and global stock markets, including shares of Asian and European automakers, tumbled Friday after President Donald Trump said the United States will impose a 5% tariff on all Mexican imports,” writes Matt Egan early this morning before the bell. “Japan’s Nikkei (N225) slumped 1.6%, while South Korea’s KOSPI (KOSPI) was mostly flat. Markets in Europe also opened lower. Britain’s FTSE 100 index fell 0.8%. Stocks in Germanyshed 1.3%, and in France they dipped 1%.”
The American president, which Egan notes has carried the self-imposed nickname of “Tariff Man,” has announced new 5% tariffs on all Mexican imports – until, he says, Mexico works to control illegal immigration.
Anyone with financial and logical acumen looking at geopolitics and money knows that this is unlikely to produce results, and that it will simply affect the market in a negative way at a time when nervous holders can least afford it.
Any new tariffs on Mexican goods are also likely to produce a major disruption in U.S. commerce.
“Mexico is one of America’s biggest trading partners and many US companies — including Ford(F) and Walmart (WMT) — rely on the country as a central part of their supply chains,” Egan writes. “Walmart declined to comment Thursday … the country is also a regional manufacturing hub for Japanese, South Korean and German automakers that assemble cars in Mexico and ship many of them to the United States. Shares in Mazda (MZDAF) and plunged more than 7%, while losses for Toyota (TM), Honda(HMC), Nissan (NSANF) and Volkswagen reached 3% or more.”
The timing, medium and content of the message seems to indicate that regardless of intent, these new trade salvos are set to move markets downward.
Perhaps those with the means to anticipate change are moving to short the market or otherwise hedge positions. Small investors should be very careful and understand that when the consequences of new tariffs make their way into the market, there will be more pressure.
The current situation seems like the encyclopedia definition of a bear market – unless there is concrete resolution of protectionist rivalries that will push costs onto consumers and producers seeking to export around the globe.
Update: as of 10:00, SP500 and DJIA are both down.