US President Donald Trump has placed a five percent tariff on all goods imported from Mexico, as part of fresh efforts to curb illegal entry into the US. He intends to double the tariff to 10 percent at the start of July, and increase it by a further five percent each month for three months, until they hit 25 percent. The tariffs will only be lifted when the numbers of illegal immigrants entering the United States across the Mexican border drops to a level Mr Trump deems appropriate.

The move has been criticised across the investment sector, with portfolio managers pointing to the economic uncertainty the move would create in the global economy.

Jack P. McIntyre, portfolio manager for global fixed income strategies at Legg Mason affiliate Brandywine Global, also argued that the tariffs would negatively affect domestic consumers in the US.

He said: “If these economic tariffs are set to continue, this will undoubtedly impact the US economy, and thus by extension, the US consumer. Whilst the US economy performed well in Q1, we mustn’t use this as a barometer for the remainder of the year. The global economy remains weak, and the US does not exist in the bubble. Indeed, the US Treasury market is telling us that the economy will slow. This latest round of tariffs will create economic uncertainty, and economic uncertainty creates wealth destruction.”

Neil Goddin, manager of Kames Global Equity fund argued that the move was possibly a consequence of Trump wanting to generate media attention in the lead up to the 2020 election. He hoped that a compromise could be reached because he believed the the implementation period of the tariffs would be “messy and complicated”.

He said: “Trump was elected on a promise to curb immigration and that is very popular with his voters. It is no surprise to see immigration becoming a key head line grabber for Trump and it is likely to continue to be so as we head into the election. It is also clear that Trump and the Republican’s favourite weapon is Tariffs; so again, expect this to be used freely as a head line grabber as we head into the election. From an implementation stand point it is pretty tough. Some industries send products back and forth to Mexico multiple times; especially the car industry when building cars, so it will be messy and complicated and hopefully a compromise can be reached.”