This week, President Trump reaffirmed his plan to construct a physical wall along the Mexican border and proposed using a 20% tariff on Mexican imports to pay for it. These statements caused Mexican President Enrique Peña Nieto to cancel an upcoming visit to the United States, where the two leaders were expected to discuss the North American Free Trade Agreement (NAFTA).
A tariff would cause prices for imported goods to rise, including Mexico’s major exports, vehicles and machinery, as well as food products like vegetables, fruits, and beer. President Trump’s hope is that changing trade policy will boost U.S. manufacturing more than it hurts other sectors of the economy.
Commodities traders are especially interested in trade with Mexico, which is the third-largest buyer of U.S. agricultural exports, primarily buying corn, soybeans, dairy, pork, and beef. If Presidents Trump & Nieto escalate their dispute and trade slows down between the two nations, U.S. farmers could suffer.
Partially due to these concerns, grains and livestock all fell near two-week lows on Friday.
Meanwhile, currency traders are following the war of words closely as well; fears of trade disputes or anti-Mexico actions have caused the Mexican peso to fall to an all-time low under 4.5 U.S. cents.
Dow over 20,000!
Stock index futures traders were rewarded this week as the Dow Jones, S&P, and NASDAQ futures contracts all reached historic highs.
Each index tracks a basket of stocks, with the S&P 500 generally seen as the most comprehensive and broadest index of the three.
The Dow, which tracks the stocks of 30 large industrial companies, blew over 20,000 on Wednesday, boosting euphoria among investors.
Gasoline fell to a seven-week low on Thursday, with futures nearing $1.50 per gallon, a price representing wholesale gasoline, without taxes or other costs included.
The fuel has been tumbling due to rising stockpiles, which stand at an all-time high for this time of year. Fuel inventories are rising as refineries are running at a fast clip while driving demand has been weak; consumption nearly 10% lower than usual. The nation currently has over 30 days’ worth of gasoline in inventory, the most in over 20 years.
Despite these factors, most analysts don’t expect prices to return to the lows seen last February, when gasoline futures dropped under 90 cents. Crude oil was near $25 per barrel at that time and stands over $50 now.