Trump’s threat of Mexico trade war sends markets lower

US President Donald Trump’s threat to open a trade war with Mexico has sent Wall Street sliding, with shares in carmakers among the worst hit.

Markets in Europe were already spooked by news the US would hit Mexico with tariffs in an anti-immigration measure.

The three main US markets opened almost 1.5% down, with General Motors, which like many carmakers has operations in Mexico, falling 5%.

News of the Mexico move comes amid a US trade war with China.

Mr Trump announced in a tweet that tariffs on all goods coming from Mexico would be introduced until the country curbs illegal immigration into the US.

From 10 June, a 5% tariff would be imposed and would slowly rise to 25% “until the illegal immigration problem is remedied”, he said.

The tweet was followed up with a White House statement giving more details.

Jesús Seade, Mexico’s top diplomat for North America, said the proposed tariffs would be “disastrous”, while analysts and investors have speculated that the measure could be the trigger that pushes the global economy into recession.

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Commerzbank strategist Ulrich Leuchtmann said: “The US trade policy has taken a qualitatively different turn. Using tariffs as a tool for non-economic goals is something which brings a new quality to proceedings.”

Shares in carmakers and supply chain companies suffered the worst. Ford fell 3.4% and Fiat Chrysler 5%. A research note from Deutsche Bank said the tariff measure “could cripple the industry and cause major uncertainty”.

In Europe, car shares were also down, with Renault and Volkswagen about 3% lower. The UK’s FTSE 100 index was down about 1%, while Germany’s Dax was 1.7% lower and France’s Cac 1.4% off.