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1. Escalating threats: President Donald Trump’s threat to impose tariffs on all imports from Mexico isn’t more of the same.

It plunges the relationship between the United States and its second largest supplier of imports into jeopardy. It leaves exposed the significant number of global businesses that move goods across the border. And the 5% tax, tied to Mexico’s ability to halt the movement of undocumented immigrants into the United States, looks like it could go into effect on June 10. That’s soon.

For investors, the president’s announcement via Twitter on Thursday, which said tariffs could eventually rise to 25%, came as a complete surprise.

“The threat of tariffs on Mexico was completely off the market’s radar,” said Cliff Hodge, director of investments at Cornerstone Wealth Group. “No one has been talking about tariffs on Mexico.”

That changed Friday. The Dow plunged 355 points, or 1.4%, as investors agonized over the latest tariff threats. The S&P 500 and Nasdaq fell, too.

Markets had already been roiled by the re-escalation of the trade war between the United States and China. Even before the president mentioned new duties on Mexico, the Dow had been on track for its sixth consecutive weekly decline, its longest streak of that kind since June 2011. It hit that mark Friday.

The China problem isn’t going away. Beijing increased tariffs on $60 billion worth of US goods last week in retaliation for the latest hike from the United States. Talks are at a standstill, and China is now making very clear that it could pull American businesses into the fray.

But proposed tariffs on Mexico differ from the tariffs on Chinese exports in two important ways.

Multinational companies have for decades relied on the ability to freely transport goods between the United States and Mexico.

More than two-thirds of trade from Mexico consists of exchanges between US companies and their subsidiaries, according to a US government report from 2017. Should that change, they’ll be in big trouble.

The United States could be looking at an “earnings recession that could flow through to an economic recession,” Hodge said.

The most vulnerable sector in this case is autos.

The industry imported $59.4 billion in parts from Mexico last year, according to US government trade data. Finished cars and trucks also come into the United States from Mexico. About 2.7 million autos were imported from Mexico last year, worth $52 billion, according to the US Commerce Department.

Tariffs are not a cost automakers are prepared to bear.

“The global nature of auto production makes the sector particularly vulnerable to an increase in tariffs,” Fitch Ratings chief economist Brian Coulton and analyst Pawel Borowski said in report this week.

Besides, global vehicle sales have already been softening, with demand falling in key markets. That means that automakers will be hesitant to pass the costs on to consumers, and could be forced to take a greater hit themselves.

The second reason that tariffs on Mexico are a big threat is that they could derail a key trade agreement.

Investors had assumed that the USMCA, which replaces the North American Free Trade Agreement between the United States, Canada and Mexico, was on track for implementation. But it requires low tariffs on products traded by its signatories, and it has not yet been approved by Congress.

Analysts at Goldman Sachs said in a research note Friday that if the tariffs take effect, the USMCA is less likely to be ratified before the 2020 election.

That would certainly spook markets, which are only now starting to price in that risk. And it could make China think twice about striking a new trade deal with the United States after seeing how easily it could be torn up.

“It will cause them to question whether it makes sense to make a deal with this administration if they are willing to use tariffs for other strategic issues later,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

2. ECB time: The European Central Bank will hold its June meeting as the situation on trade continues to deteriorate and the race to find a replacement for president Mario Draghi heats up.

Analysts expect the central bank to outline details on additional cheap loans for banks while maintaining historically low interest rates.

“We expect a dovish Draghi who emphasizes that the ECB is continuing to reassess the outlook and stands ready to use all instruments,” Bank of America Merrill Lynch analysts said in a recent note.

3. Jobs, jobs, jobs: America’s booming labor market may have nowhere to go but down.

The May jobs report out this Friday is expected to show that US payroll growth decelerated to 190,000 jobs in May, according to a Reuters survey of economists. That would mark a slowdown from April’s surge of 263,000.

However, adding that many jobs would still represent very healthy growth, especially given that unemployment is sitting at a 49-year low of 3.6%. Wages gains are expected to be flat, at about 3.2% year-over-year.

A clean bill of health from the jobs report could ease Wall Street’s concerns about slowing economic growth.

4. India-US trade: The Trump administration added another country to its trade policy overhaul on Friday, announcing it would end preferential trade treatment for India on June 5. The move effectively ends tariff exemptions on Indian goods worth over $5 billion.

In a statement, Trump said India had not done enough to provide the United States with “equitable and reasonable access to its markets.” India called the move “unfortunate” but said it would continue to seek strong economic ties with the United States.

5. Apple event: Apple’s annual developers conference, known as WWDC, kicks off Monday in San Jose, California.

The company is expected to preview new software features coming to iPhones, iPads, Macs and the Apple Watch. That could include improved health tracking tools and a dark mode on iOS devices.

Monday — Apple’s WWDC begins; US, German and Chinese manufacturing data
Tuesday — Tiffany & Co (TIF), Lands’ End (LE) and GameStop (GME) earnings
Wednesday — EIA crude oil inventories; US services data; American Eagle Outfitters (AEO) and Campbell Soup (CPB) earnings
Thursday — ECB and Reserve Bank of India rate decisions; Europe’s GDP growth estimate; Beyond Meat (BYND) earnings
Friday — US jobs report

Matt Egan and Heather Kelly contributed to this report.