Washington, Jun 1 (AP/UNB) — President Donald Trump's surprise threat to impose escalating tariffs on Mexican imports jolted industry leaders throughout the U.S. economy Friday, sparked opposition even from usual Trump allies and set the stage for American consumers to face higher prices.
It also sent stock markets tumbling, with the Dow Jones industrial average closing down roughly 355 points, or 1.4%. Investors poured money instead into the safety of bonds, sending yields lower and signaling that they fear the economy will slow in the coming months.
Trump vowed Thursday to slap a 5% tariff on all Mexican imports on June 10, just over a week away, and raise those tariffs to 25% by October, unless Mexico stops the flow of Central American migrants into the U.S.
If the tariffs were to take effect, they could eventually raise prices for a new Chevrolet Blazer SUV, a burrito at Chipotle, a new shirt or a Corona beer. A 5% duty on the $346.5 billion of goods imported from Mexico translates into $17 billion in tariffs. Some of that higher cost might be paid, at least initially, by U.S. companies. But a significant portion would likely be passed on to U.S. shoppers.
The impact of Trump's latest tariffs, should they be imposed, will fall first on U.S. companies. Businesses in many industries have set up tightly linked supply chains with Mexico. Billions of dollars of auto parts, for example, are sent back and forth across the U.S.-Mexico border, in some cases several times, as components are added and integrated into finished cars. Similar networks exist in other industries, from clothing to electronics. The import taxes could quickly translate into much higher costs.
"That's what's so concerning about these tariffs," said John Mitchell, president of IPC, a trade group representing the electronics industry. "It undercuts the region's ability to leverage each other's strengths to benefit North American manufacturing."
Peter Navarro, a top trade adviser to the Trump White House, insisted in an interview on CNBC that the Mexican government and businesses would pay the tariffs. But about 40% of imports from Mexico are from U.S.-affiliated companies, meaning there is no Mexican company that would pay. Instead the tariffs will simply raise costs for U.S. companies — and ultimately for consumers — particularly for parts that cross the border several times, Mitchell said.
The U.S. economy has been integrating with Mexico's since the implementation of NAFTA in 1994. All U.S.-made cars now include at least some parts from overseas, and 37% of those parts are from Mexico.
"Any barrier to the flow of commerce across the U.S.-Mexico border will have a cascading effect — harming U.S. consumers, threatening American jobs and investment, curtailing the economic progress that the administration is working to re-ignite," said David Schwietert, interim president of the Auto Alliance trade group, which represents U.S. automakers and foreign companies that build cars in the United States, such as BMW and Toyota.
Shares of General Motors Co., which imports more vehicles into the U.S. than any other automaker, tumbled 4.25% Friday.
"For GM, we roughly estimate that a 5% tariff could be a several-hundred-million dollar annual earnings hit," said Itay Michaeli of Citi Investment Research.
The new tariffs came as a surprise for many companies because the Trump administration had just renewed its push to win congressional approval for the U.S.-Mexico-Canada trade agreement, its update to NAFTA.
Sen. Chuck Grassley, R-Iowa, a usual Trump ally and the chairman of the Senate Finance Committee, condemned the president's action as "a misuse of presidential tariff authority" that would burden American consumers and "seriously jeopardize passage of USMCA."
Some industry representatives said the duties would not encourage companies to return production to the U.S., as Trump has said he wants, but actually have the opposite effect: It will discourage them from relocating to the U.S. because they'd have to pay more for imported parts.
"If you can't buy your components here, you're not going to think about coming back here," Mitchell said.
Americans may also see higher prices in grocery stores. The U.S. imports $12 billion of fresh fruits and vegetables from Mexico, including tomatoes, avocados, peppers and lemons.
"This is a tax on healthy diets, plain and simple," said Lance Jungmeyer, president of the Fresh Produce Association of the Americas.
Jungmeyer noted that food imports from Mexico haven't been subject to tariffs for decades, and importers would have to file paperwork with Customs to pay duties. That can 10 days or more to process, potentially leaving many companies unable to import for a time after June 10.
"I've got to educate a whole range of people who haven't paid tariffs on Mexican produce since 1995," Jungmeyer said.
Many U.S. restaurant chains buy tomatoes and other fresh produce from Mexico. Laurie Schalow, an executive for Chipotle Mexican Grill, said the chain has sought to diversify its supplier base and now buys some avocados from Chile and Peru and is less dependent on Mexico. Still, the tariffs would hurt the company, Schalow said.
Trump has already imposed 25% tariffs on $250 billion of goods from China. The additional duties on Mexican imports could weaken the U.S. economy. Growth was already forecast to slip to a roughly 1.5% annual pace in the April-June quarter, down from 3.1% in the first three months of the year.
Gregory Daco, chief U.S. economist at Oxford Economics, estimates that if the full 25% duties on Mexican goods were put in place, U.S. growth next year would be cut by 0.7 percentage point.
The U.S. imports $2.4 billion of clothing and textiles from Mexico. Stephen Lamar, executive vice president of American Apparel and Footwear Association, said companies are already thinking about how to cut costs but will likely have to raise prices because their profit margins are so thin.
Mexico is the eighth-largest supplier of clothing and seventh-largest supplier of footwear to the U.S. market. It's the largest supplier of men's and boy's jeans, accounting for 35% of imports, according to the AAFA.
Shares of Kontoor Brands, which includes Wrangler and Lee, fell nearly 8%, while shares of Levi Strauss dropped 7%. Both companies obtain some of their denim from Mexico.
About 70% of imported beer is from Mexico, up from less than 20% in 1990, according to the National Beer Wholesalers Association. Shares of Constellation Brands, which makes Corona and Modelo beers, among others, fell nearly 6% Friday.
Jeremy Seaver, owner of Tios Mexican Cafe in Ann Arbor, Michigan, said the tariffs would hurt his business. He uses avocados from Mexico, serves Mexican tequila, beer and soda and sells Mexican hot sauces. Even his restaurant's decorations are all from Mexico, he said.
"I'm very concerned," he said. "Five percent (tariff) doesn't sound like a lot, but to a small business like mine, that's a lot."
Washington, Jun 1 (AP/UNB) — Exasperated by reports of a flood of illegal border crossings, President Donald Trump summoned his top immigration advisers to demand action. Responding to his mounting concern, including his extreme threats to entirely close the U.S.-Mexico border, they prepared an alternative but still-inflammatory plan to levy escalating tariffs on all Mexican imports to the United States.
Thursday night's surprise announcement of the plan by Trump, threatening to upend ratification chances for his own revised North American free trade pact, demonstrated the lengths to which the risk-taking president is willing to go to crack down on illegal immigration, even in the face of bipartisan criticism, legal challenges and polarized public feelings.
He's setting the tricky politics of immigration and trade — the two issues that defined his candidacy and bedevil his presidency — on a collision course and injecting new tensions into his relations with political allies as he struggles to show results in his campaign for a second term.
"Mexico has taken advantage of the United States for decades," Trump declared anew in a tweet on Friday. That was the morning after he announced the 5% tariff would kick in on June 10 — and increase monthly to 25% "until the Illegal Immigration problem is remedied."
"Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!" he said.
Debate over solutions aside, indicators at the border have indeed been getting worse. For May, officials said Thursday, apprehensions are expected to hit their highest level in more than a dozen years and "significantly surpass the record 109,000 in April," said acting Homeland Security Secretary Kevin McAleenan.
On Wednesday, a group of 1,036 — including families and unaccompanied children — was appended after crossing from Juárez. That was the largest group ever apprehended at the border.
Nonetheless, Trump's tariff prescription for the problem was instantly panned across the political spectrum . Republican Sen. Chuck Grassley of Iowa, a usual Trump ally and the chairman of the Senate Finance Committee, said it was a "misuse of presidential tariff authority" that would burden American consumers and "seriously jeopardize passage" of the U.S.-Mexico-Canada pact to modify the North American Free Trade Agreement.
"Imposing tariffs on goods from Mexico is exactly the wrong move," said Neil Bradley, executive vice president of the U.S. Chamber of Commerce , the establishment lobbying giant that now is exploring legal action to block the tariffs.
"These tariffs will be paid by American families and businesses without doing a thing to solve the very real problems at the border," Bradley said, imploring Congress and the president to work together to address border problems.
To both allies and critics, the tariff escalation marks the latest manifestation of Trump's increasing reliance on instinct and his aides' increasing unwillingness or inability to constrain an impulsive leader. Many of the people who had once talked Trump out of going through with his most radical ideas, such as completely shutting down the southern border or renewing the controversial immigrant child separation policy, have been pushed out of the administration, including former Homeland Security Secretary Kirstjen Nielsen.
The tariff announcement was made with a striking amount of secrecy for the leak-prone Trump administration, with barely two dozen officials in the West Wing aware of what was to transpire. Trade Representative Bob Lighthizer and other officials with trade portfolios were not included in the final discussions Thursday and privately expressed opposition to the move, according to three people familiar with the matter who spoke only on the condition of anonymity.
Trump is mindful that many of his efforts to clamp down on illegal immigration have been stymied by courts or Congress, and that his promise to build a border wall will be far from fulfilled by the time voters decide his political fate next year. With his campaign depending on even more of his hard-core supporters turning out in 2020 than in 2016, Trump's team is worried that the spike in crossings could prove to be a political headache with his base.
But in aiming for progress on that front, Trump is now throwing into the wager another campaign promise: approval of his renegotiated North American trade pact.
Sandwiched between two presidential foreign trips, and with senior adviser and Mexico liaison Jared Kushner out of the country, the tariff announcement caught many in the White House and on Capitol Hill unawares. Press secretary Sarah Sanders insisted that the White House had briefed key lawmakers and allies on the plan before it was announced, though some complained they found out only at the last moment, with no time to provide feedback.
While the announcement was a surprise, Trump's ire over a sharp increase in southern border crossings and his demand for increasingly drastic action were not. Trump attorneys, including White House Counsel Pat Cipollone, had been studying how to fulfill the president's wish for weeks and settled on the tariff plan as a more legally-sound move than Trump's push to close the border.
White House officials assert that the tariff announcement was a negotiating tool, designed to get Mexico to act. And, perhaps seeking to calm anxious markets, they suggest the taxes might never take effect.
"We fully believe they have the ability to stop people coming in from their southern border and if they're able to do that, these tariffs will either not go into place or will be removed after they go into place," said acting White House chief of staff Mick Mulvaney.
Asked what Mexico can do to avoid the levies, press secretary Sanders said a good start would be for Mexico to send home Central American migrants crossing through their country to get into the United States.
"They can return them back home," she said. "They can stop these massive caravans from coming through their country into ours. That would be a very big first step."
Singapore, Jun 1 (AP/UNB) — U.S. Acting Defense Secretary Patrick Shanahan on Saturday denounced China's efforts to steal technology from other nations and militarize man-made outposts in the South China Sea as a "toolkit of coercion," saying Beijing's bad behavior must end.
In his first major speech on the international stage, Shanahan mixed sharp criticism of China and warnings of North Korea's "extraordinary" threat with vows that the U.S. will remain strongly committed to the Indo-Pacific region and is ready to invest billions of dollars in securing its stability.
While he didn't specifically name China in early parts of his speech, he made clear who his target was, making pointed references to Beijing's campaign to put advanced weapons systems on disputed islands in the region.
"If these trends in these behaviors continue, artificial features in the global commons could become tollbooths. Sovereignty could become the purview of the powerful," Shanahan said.
His remarks underscore America's frayed relations with China, as the Trump administration wages a trade war with Beijing, imposes sanctions on Chinese tech giant Huawei and approves a weapons sale to Taiwan, the self-ruled island the Communist mainland claims as its own territory. And they reflect America's new national defense strategy that declared great power competition with China and Russia as top priorities.
Shanahan's speech on Saturday is also arguably an audition to both the world and U.S. top leaders in Congress, as his nomination for permanent secretary has still not been sent to Capitol Hill by President Donald Trump.
And listening closely in the audience were nervous allies and partners in the region who are worried about the economic impact of the U.S.-China trade dispute and the political blowback of America's complaints about Beijing's rapid progress in hypersonic weapons, nuclear technology and space launches.
Shanahan told reporters Friday that he would use his speech to the Shangri-La Dialogue conference to criticize Beijing's use of coercion to advance its interests. And after his remarks, during questions from the audience, he suggested that his speech was more directly critical than those of other U.S. defense secretaries in the past.
"I won't apologize for the way I framed some of my remarks, but we're not going to ignore Chinese behavior," Shanahan said. "I think in the past people have kind of tiptoed around that. It's not about being confrontational, it's about being open and having a dialogue."
He added that the U.S. is willing to cooperate with China and welcomes competition, but said behavior that erodes other nations' sovereignty and sows distrust of China's intentions must end.
"Competition does not mean conflict," he said. "Competition is not to be feared. We should welcome it, provided that everyone plays by internationally established rules."
He also rejected suggestions that the U.S. is in a "faceoff" or trade war with China and said economic negotiations with Beijing are ongoing and the Pentagon is building relations with the Chinese military.
But he went on to restate America's distrust of Huawei, the world's No. 1 network equipment provider and second-largest smartphone maker. The U.S. claims Huawei is legally beholden to China's ruling Communists, which could use the company's products, including its next-generation wireless network known as 5G, for cyberespionage.
Shanahan said Huawei is "too close to the government" of China, which has laws requiring data be shared.
"That's too much risk for the department," said Shanahan. "You can't trust that those networks are going to be protected.
China on Friday warned that it was drawing up a list of "unreliable" foreign companies, organizations and individuals for targeting in what could signal retaliation for U.S. sanctions on Huawei.
Much of Shanahan's speech centered on America's work with partners across the region.
"The Indo-Pacific is our priority theater," he said. "We are where we belong. We are investing in the region. We are investing in you, and with you."
But he also called on the Pacific nations to invest in their own futures.
On North Korea, Shanahan said the U.S. is focused on negotiations to achieve full denuclearization of the Korean Peninsula, adding that the North "has neared a point where it could credibly strike regional allies, U.S. territory and our forward-deployed forces."
He credited China for its cooperation on enforcing UN sanctions against Pyongyang.
In a departure from past conferences, however, Shanahan faced little backlash from the Chinese leaders in the audience during the question-and-answer session.
On Friday, Chinese defense ministry spokesman Wu Qian was both conciliatory and challenging.
Speaking to reporters after Chinese Defense Minister Wei Fenghe met with Shanahan, Wu noted that the U.S. has recently "had a series of negative words and deeds" on Taiwan issues.
"On the issue of safeguarding national sovereignty and territorial integrity, the U.S. should not underestimate the determination of the Chinese military, will or ability," he said.
But he also said Shanahan and Wei found room for agreement on the need for denuclearization of the Korean Peninsula and efforts to improve communication between the U.S. and China.
Shanahan told reporters Friday that the U.S. needs to do a better job of describing its level of commitment to the region, including military exercises, training and other activities.
Rio De Janeiro, Jun 1 (AP/UNB) — Brazilian President Jair Bolsonaro on Friday accused the country's Supreme Court of "legislating" from the bench after a majority of its justices voted to make homophobia a crime like racism.
Bolsonaro, who has in the past acknowledged that he is a homophobe, was speaking at a national convention of the evangelical Assemblies of God Madureira churches. Conservative church groups have been leading resistance to LGBT rights measures and contributed to his victory in the last presidential election.
Earlier this month, a majority of the top court's justices ruled that homophobia should be framed within the racism law until congress approves specific legislation. They argued the ruling was to address an omission that had left the LGBT community legally unprotected.
The final decision is due on June 5 after the remaining judges who have not yet voted make their decisions, but the result will not be modified.
In 2018, 420 LGBT people were killed across Brazil, according to the nonprofit Grupo Gay da Bahia.
During his 27 years in Congress and then campaigning for president, Bolsonaro, a former army captain, has repeatedly made offensive comments about gays, blacks, other minority groups and women.
He once said in an interview he would rather have a dead son than a gay son.
Virginia Beach, Jun 1 (AP/UNB) — A longtime city employee opened fire at a municipal building in Virginia Beach on Friday, killing 12 people and sending terrified co-workers scrambling for cover before police shot and killed him, authorities said.
Four other people were wounded in the shooting, including a police officer whose bulletproof vest saved his life, said Virginia Beach Police Chief James Cervera. The city’s visibly shaken mayor, Bobby Dyer, called it “the most devastating day in the history of Virginia Beach.”
The shooting happened shortly after 4 p.m. when the veteran employee of the Public Utilities Department entered a building in the city’s Municipal Center, and “immediately began to indiscriminately fire upon all of the victims,” Cervera said. He did not release the suspect’s name.
Police entered the building and got out as many employees as they could, then exchanged fire with the suspect, who was killed, the chief said.
Police initially said the gunman shot and killed 11 people. Cervera later said one more died on the way to the hospital.
The shooting sent shock waves through Virginia Beach, the state’s largest city and a popular vacation spot in southeastern Virginia. The building where the attack took place is in a suburban complex miles away from the high-rise hotels along the beach and the downtown business area.
Virginia Gov. Ralph Northam said in a statement he was devastated by the “unspeakable, senseless violence,” and is offering the state’s full support to survivors and relatives of the victims.
“That they should be taken in this manner is the worst kind of tragedy,” the governor said during a Friday night news conference.
The White House said President Donald Trump had been briefed and was monitoring the situation.
Megan Banton, an administrative assistant who works in the building where the shooting happened, said she heard gunshots, called 911 and barricaded herself and about 20 colleagues inside an office, pushing a desk against a door.
“We tried to do everything we could to keep everybody safe,” she said. “We were all just terrified. It felt like it wasn’t real, like we were in a dream. You are just terrified because all you can hear is the gunshots.”
She texted her mom, telling her that there was an active shooter in the building and she and others were waiting for police.
“Thank God my baby is OK,” Banton’s mother, Dana Showers, said.
Five of the injured were being treated at Sentara Virginia Beach General Hospital and a sixth was being transferred to the Trauma Center at Sentara Norfolk General Hospital, Sentara Healthcare tweeted.
At a nearby middle school, friends and relatives were reuniting with loved ones who were in the building when the shooting happened. They included Paul Swain, 50, who said he saw his fiancee from across the parking lot, clearly in an agitated state.
“I think she knew some of the people,” he said.
Outside the school, Cheryl Benn, 65, waited while her husband, David, a traffic engineer with the city who was in the building where the shooting happened, gave a written statement to detectives.
She said her husband initially called her from a barricaded room and said it sounded as if someone had been working with a nail gun. Then he saw the bodies.
“This is unbelievable for Virginia Beach,” Cheryl Benn said. “By and large, it’s a pretty calm and peaceful place to live.”