Trump Cancels Mexico Tariffs While Threatening China on Trade
Today was going to be the day that a new 5% tariffs on all imported goods from Mexico was supposed to go into effect (before climbing another five points monthly until it reached 25%). However President Trump announced on Friday that he was canceling that plan after our southern neighbors allegedly agreed to a deal to help curb immigration through the country.
In tweets sent by the President on Friday, he wrote, “I am pleased to inform you that The United States of America has reached a signed agreement with Mexico. The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended. Mexico, in turn, has agreed to take strong measures to stem the tide of Migration through Mexico, and to our Southern Border.” He continued, “This is being done to greatly reduce, or eliminate, Illegal Immigration coming from Mexico and into the United States. Details of the agreement will be released shortly by the State Department.” Over the weekend a New York Times report suggested that parts of the deal the President is touting were actually agreed to months ago. Trump has denied those claims, adding that the Times “will do anything possible to see our Country fail!” and again calling the paper “The Enemy of the People.”
While Wall Street celebrated the trade news, it’s also worth noting that the announcement of the canceled tariffs came on the same day that the new jobs reports showed that the U.S. added just 75,000 jobs in May. That’s much lower than the 180,000 expected and the 223,000 the economy averaged on a monthly basis last year. Nevertheless the Dow Jones Industrial Average closed 200 points higher on Friday.
Unfortunately, although the Mexico trade front has brightened, the President is putting new pressure on China. In an interview with CNBC, President Trump said his administration would announce new tariffs on Chinese imports if President Xi Jinping were to pull out of this month’s G20 summit in Osaka, Japan. Trump explained that the U.S. currently has tariffs on “35% to 40%” Chinese goods and says that will increase “another 60%” if a deal isn’t reached soon. Speaking to the network’s Squawk Box program, the President also spoke favorably of his tariff policies, saying, “People haven’t used tariffs, but tariffs are a beautiful thing when you are the piggy bank, when you have all the money. Everyone is trying to get our money.”
At this time it doesn’t seem that markets are too concerned about Trump’s latest China threats (or the weak jobs report) as the Dow is currently up 0.5%. Of course that could quickly change if the expected G20 meeting doesn’t go to President Trump’s liking or doesn’t happen at all. Therefore Wall Street will certainly be kept on its toes as the U.S.’s trade policy continues to surprise.