Wow the stock market is an ass. A 5% tariff on $350B is drop in the bucket yet is sends the market into fear and panic. LOL!
Mexico is a socialist government.
The tariff impacts their national economy (government budget) by 5%. The GDP of Mexico isn’t just “tied” to the economy...it is the foundation of their national budget. In socialist countries, tariffs are paid by the government, not passed along to consumers.
The government will have to raise taxes to industry, impacting several US based manufacturers.
The US manufacturers will put heavy pressure on Mexico...or, leave.
Trump warned them.
Guess that depends on your definition of "fear and panic."
Let's see... today:
DOW -1.41%
S&P 500 -1.32%
NASDAQ -1.51%
Doesn't look like "fear and panic" to me. We can get excited when the markets decline 3% or more. Any thing less is normal fluctuation.
Because a great deal more is at stake than just simply a tariff. Depending on what industry is targeted it has a ripple effect. Let’s say the car industry. Parts manufactured in Mexico get shipped to the US. Once it hits the border it gets dropped at a warehouse to be inspected by customs. 5% on these parts are remitted to the piggy US Government who isn’t quite big enough already.
US truck driver who the assembly company pays to ship to their assembly plant may be the target of unemployment due to the tariff. That’s just to break even. The part is assembled by a US worker. To make a profit either the part is now marked up 5% and passed to the dealer having to seek the car fully assembled or the US worker who assembled the part must now also be let go.
Assembled car arrives at dealer. Dealer can either let go of a salesperson to make up the difference on the 5% per car or mark his sales price up 5% and pass it onto us the consumer. Within each of these scenarios if an employee is released at each point along this path it then impacts the local economy. Grocery stores, real estate, eateries, department stores etc. now let’s say this continues per the plan to increase to 10-15-20-25. Now you’re talking an enormous cascading financial impact to the US economy and all so the big fat piggy Government can collect more money. Yes it’s a punishment but let’s not fool ourselves here into thinking that punishment doesn’t go two ways. It does and in a big way.