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How Tariffs Are Affecting Mexico’s Manufacturing Activity

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Mexico’s manufacturing PMI in May 2018

According to a report provided by Markit Economics, Mexico’s (EWW) manufacturing activity has been falling gradually since March. Its manufacturing PMI (purchasing managers’ index) stood at 51.0 in May as compared to 51.6 in April. The PMI figure didn’t meet the market expectation of 51.5.

Mexico’s manufacturing PMI in May 2018 was affected by the following factors:

  • Production output and volume improved at a softer pace in May as compared to April.
  • Both the new orders and export orders also weakened in May as compared to April.
  • The employment in the manufacturing sector improved at a softer rate during the month.

Trump’s announcement about the imposition of import tariffs on steel and aluminum on Mexico, Canada, and Europe in May 2018 broadly increased trade war concerns. The tariffs are also expected to affect the trade relationship between the US (SPY) and Mexico. If Mexico imposes retaliatory tariffs on the US, it could affect the economic activity of both countries.

Performance of ETF in May 2018

The iShares MSCI Mexico Capped ETF (EWW), which tracks the Mexican economy, fell 14.5% in May 2018. Similarly, the Global X FTSE Southeast Asia ETF (ASEA), which tracks the performance of Southeast Asia, fell 6.4% in the same month.

In the next part of this series, we’ll analyze the performance of Russia’s manufacturing PMI in May 2018.

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