— This is the script of CNBC's news report for China's CCTV on June 6, 2018, Wednesday.
We all know that Mexico is the 3rd biggest trade partner of US, following Canada and China.
From this chart, we can see the product scale that US has exported to Canada and China in recent years clearly. Among them, in 2016, the total value of the product that US exported to Mexico reached 229.7 billion dollars.
And the revenge tariff policy announced by Mexico will also touch US's raw nerve of exporting, including a 20% tax on pork and pork shoulder meat exported from the United States, a 20% to 25% tax on U.S. cheese and bourbon, and a 20% tax on apples and potatoes, as well as steel products.
What do these products mean to US exporters? In 2017, Mexico imported 1.47 billion dollars pork from the U.S. and this scale accounted for 23.7% of the US exported pork, among that imports, pork thigh and pork shoulder were approximately 1.07 billion dollars.
At the same time, we can see that the shadow part in this chart shows the distribution of U.S. pork exporters in different U.S. states, which almost cover all US states, even though the situation varies from state to state, but in general, imposing tax on pork, apple, grape, cheese and steel etc. will have a considerable economic impact on these states in the US. And among these states, most of them are the regions that Trump won in the 2016 US presidential election.
And we have to know that because of the close trade tariff between US and Mexico, the revenge tariff measures caused US government make concessions previously, for example, in 2011, US cancelled a cross-border transportation plan that prohibited Mexican truck drivers from driving to the four states of the U.S.-Mexico border.
Then Mexico launched aggressive trade revenge, imposing retaliatory tariff on more than 90 US products. Finally, Obama government came out a new cross-border transportation agreement with Mexico; therefore, we will keep an eye on whether Trump government will make concession or not, however, in addition to the Mexico, EU and Canada may also introduce trade tariff policy against US. And these potential trade frictions make the market be nervous, with a decline in the exchange rate of Mexico Pesos.
We can see that from the recent 3 months, especially in May, the exchange rate of US dollar against Mexican peso increases rapidly, indicating the pesos bear more burden of devaluation. The peso was depreciated by more than 1% against the U.S. dollar overnight.
And for the US market, the strong rally in tech stocks boosting NASDAQ composite index though, Dow7 Jones industry index declined. And the US stock market may experience the turmoil further, if EU and Canada take more measures. We will keep an eye on this issue.