President Trump has announced that starting on June 10, the US will impose a 5% tariff on imports from Mexico. The tariffs will increase gradually to 25% by October if Mexico doesn’t curb illegal immigration across the border into the US.
President Trump is using the International Emergency Economic Powers Act to impose the tariffs on Mexico. He has used emergency powers three times in May. President Trump declared a national emergency to approve the sales of ~$8 billion worth of weapons to the United Arab Emirates, Jordon, and Saudi Arabia. The move would benefit companies like Boeing (BA) and General Electric (GE).
At the beginning of May, President Trump used the International Emergency Economic Powers Act, the National Emergencies Act, and section 301 of the title 3, United States Code to bar Huawei from doing business with US companies without approval. However, the announcement led to a sell-off in stocks like Qualcomm and Intel that do business with Huawei.
Auto stocks like Ford (F) and General Motors (GM) are underperforming the S&P 500 (SPY) on May 31 after President Trump’s announced the tariffs on Mexican imports. US automakers have integrated supply chains spread across the United States, Mexico, and Canada. If President Trump goes ahead with the tariffs on Mexico, it could lead to higher costs for US automakers. The US automotive industry is already battling slowing sales.
Mexico border wall
President Trump declared a national emergency earlier this year to garner funds for the wall along the Mexico border. Last year, President Trump imposed a 25% tariff on US steel imports and a 10% tariff on aluminum imports after the Department of Commerce’s probe under the rarely used Section 232 of the Trade Expansion Act of 1962 found that steel imports threaten US national security.