Weekend Review: Relief as Trump Abandons Mexican Tariffs

Source: Forex News

It
was a busy weekend for the market as investors focused on the Mexican and US
issues. Two weeks ago, Donald Trump announced that the country would impose
tariffs on Mexican goods. His argument was that Mexico was not doing enough to
prevent the illegal Central American migrants who traveled through its country.
Soon after the announcement, Mexico sent a powerful delegation of ministers to
have talks with US authorities. On Friday, Trump said that the two countries
had made a deal that will help reduce the flow of migrants to the US. This
averted a bad trade war between the US and Mexico, which have an annual trade
relationship of more than $700 billion.

Investors
also focused on trade as China made moves to retaliate against the US. On
Sunday, Xinhua announced that the country was considering rolling out export
controls on sensitive technologies. This came two weeks after the country
announced fresh measures on the export of rare earth, which it dominates. The
new measures will follow the model of the United States, which puts significant
curbs on exports. For example, special authorization is required when the US
exports arms to other countries. China argues that these controls are part of
the reason why it continues to have a major trade deficit with the US.

Another
big news over the weekend was the ongoing talks to merge United Technologies
(UTX) and Raytheon. The combination of the two large companies will create the
second-biggest defense contractor in the US with a market capitalization of
more than $120 billion. The deal could be announced as soon as today and the
resulting company will be called Raytheon Technologies. The two companies
employ more than 180K people globally and will have $74 billion in sales this
year. This deal comes a few days after the previous high-end deal between
Renault and Fiat Chrysler collapsed.

Over
the weekend, finance ministers of the 20 powerful countries in the world met at
Fukuoka, Japan ahead of the G20 meeting, which will take place later this
month. Among the major outcomes of the meeting was a decision to have higher
taxes for digital companies like Google and Facebook, in what is being known as
a digital tax. These companies operate globally and can often choose to book
sales in a low-tax jurisdiction. In addition, many countries are not able to
book the taxes for internet advertising. Countries like France and UK are
bringing digital services taxes based on local sales and not profits. This also
risks the issue of double taxation.

On
Friday, the Labor Department released the May jobs numbers that disappointed.
In the month, the economy added just 75K jobs, which was lower than the
expected 180K. In the month, wage growth slowed to 3.2% while the unemployment
rate remained at the current 3.6%. This was a disappointing jobs data, coming
at a time when the US is experiencing a major trade war with China.

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