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Global markets battered by Trump's Mexico tariff threat

Credit: Reuters Studio
Published on May 31, 2019 - Duration: 02:28s

Global markets battered by Trump's Mexico tariff threat

The Dow dropped 354 points as stocks tumbled worldwide and U.S. government bond yields tested new 20-month lows after a White House threat to slap a 5% tariff on Mexican goods added to concerns punitive measures will slow the global economy.

Conway G.

Gittens reports.

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Global markets battered by Trump's Mexico tariff threat

Side-swiped... caught off guard... unwelcome and unexpected... Just some of the phrases global investors used Friday in their reaction to a surprise tweet the U.S. plans to slap tariffs on Mexican imports until immigration is curtailed at the Southern border.

The Dow Jones Industrials dropped more than 300 points, following on the heels of pullbacks across Europe and Asia.

SOUNDBITE: REUTERS BUSINESS CORRESPONDENT CONWAY G.

GITTENS (ENGLISH) SAYING: I'm Conway Gittens in New York.

The threat of tariffs is throwing another wrench into the global trade machine, which is already on edge over the trade war between the U.S. and China.

Investors are especially worried about the rationale of the Mexico-tariff threat since the White House looks like it is prepared to expand the use of economic measures to tackle non-economic problems. Friday's fall made a terrible month for stocks even worse.

U.S. stocks suffered their first monthly drop all year.

Manufacturers with big exposure to Mexico - hit the hardest....that includes Ford and GM, as well as other global automakers.

Drinks importer Constellation Brands and transport companies like Kansas City Southern, posted losses as well.

Business and trade groups were irate.

The U.S. Chamber of Commerce going as far as threatening possible legal action to derail the tariffs.

And there could be further pain for America's farm heartland.

Agricultural goods produced in farming states that backed Trump, should be a target if trade tensions increase, according to the head of Mexico's main farm lobby, taking a page from China's playbook.

Anxiety over the global economy - causing a further stampede into the perceived safety of government debt around the world.

Bond yields in the U.S. - moving closer to two-year lows.

The demand for a safe place to hide money is so intense, some global investors are willing to buy European and Asian bonds with record-low negative returns.

The market jitters- putting a spotlight on The Federal Reserve, which earlier this year vowed to be patient before making any rate moves.

But bets are piling up on Wall Street that the Fed 's next move will be to lower rates.

JP Morgan Chase told clients Friday it now predicts the Fed will cut rates twice before this year is out, on belief storm clouds from Trump's trade fights will likely slow this economy.

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