Dow Falls Sharply as Trump Targets Mexico With Tariffs Threat

U.S. economic growth revised sharply downward

Here Are 3 Hot Things to Know About Stocks Right Now

  • The Dow Jones Industrial Average tumbled Friday after President Donald Trump threatened to impose tariffs on Mexican imports.
  • Automakers were hit hard by the proposed tariffs, with shares of General Motors (GM)  and Ford (F)  both falling on Friday.
  • Shares of Uber Technologies  (UBER)  fell even though the ride-hailing company reported better-than-expected earnings in its first quarter as a public company.

Wall Street Overview

Stocks plummeted Friday as President Donald Trump’s announced threat to impose tariffs on Mexican imports, along with worries about the ongoing U.S.-China trade war, sent investors running for cover.

The Dow Jones Industrial Average fell 275 points, or 1.10%, to 24,894, the S&P 500 sank 1.17%, and the Nasdaq retreated 1.29%. The Dow is headed for its sixth straight week of losses.

The new tariffs will begin at a rate of 5% starting June 10. Tariffs would then rise to 10% on July 1, 15% on Aug. 1, 20% on September 1 and 25% on Oct. 1 if Mexico doesn’t take sufficient actions to stem what Trump has described as a wave of illegal immigration from Central America.

“The latest tariff threat with Mexico was quite unexpected, as we’ve been hearing how well discussions have been going with both Canada and Mexico,” said Ryan Detrick, senior market strategist for LPL Financial. “This is just the latest worry to put on the fire for investors. The big question at the end of the day though is can we really fight two trade wars at the same time?”

Automakers were especially hard hit by the tariff threat. General Motors (GM) , which has the biggest U.S. presence in Mexico, fell 3.7% to $33.54, while Ford (F) , which has ramped up electric vehicle production in Mexico while unveiling sweeping global job cuts, saw its shares fall 2.9% to $9.45 a share.

“Automakers may indeed see large financial impact and uncertainty from the tariffs, as all major OEMs (original equipment manufacturer) import a considerable portion of the vehicles they sell in the U.S. from Mexico,” Deutsche Bank research analyst Emmanuel Rosner said in a research note. “They also use large content imported from Mexico in the vehicles they produce in the U.S.”

Ultimately, Rosner wrote “we believe the tariffs on vehicles would undoubtedly be passed on to consumers, which would raise the price of vehicles sold in the U.S. by an average of about $1,300.”

“We have a president who thinks that tariffs are simple, easy and without any consequence to any company that is doing business in that country, because it should be doing business here,” said TheStreet’s founder Jim Cramer on Real Money. “We have a president who is now at odds with every trading lesson we have learned and every market that had been open to us. We have a president who has a trading policy that is rash, unthinkable and almost designed to make the markets crash.”

Shares of Uber Technologies  (UBER)  fell 3.5% to $41.18  after the company reported a first-quarter loss of $1.01 billion, or $2.26 a share, on revenue of $3.1 billion in its first earnings report as a public company.

Gap Inc. (GPS)  fell 14% to $17.71 after its first-quarter earnings and sales missed analysts’ expectations and the retailer cut its fiscal-year forecast. Gap Inc. is Real Money’s Stock of the Day.

Costco  ( COST) fell 3.3% to $233.56 after the wholesale shopping club company said it may have to raise prices in order to offset potential tariffs on China imports even as it posted stronger-than-expected third quarter earnings.

Nutanix (NTNX) shares plummeted nearly 20% to $26.28 after a grim earnings report showed a downtick in revenue and disappointing outlook for the cloud storage firm.

In economic news, prices on consumer purchases excluding food and energy rose by 0.25% in April, the most since October 2017, the Commerce Department said.

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