Markets shaken as Trump announces shock Mexico tariffs – as it happened

Levies to start on 10 June linked to 'remedying illegal immigration'

• US President Donald Trump announces 5% tariffs in surprise move
• UK house prices fall as confidence remains subdued, says survey
• British businesses urge Theresa May to put net-zero emissions in law
• German government bond yields fall to record low in flight to safety

3.48pm BST

Donald Trump is showing no signs of backing away from last night's imposition of tariffs on Mexican imports into the US: the president has doubled down on his criticisms as morning breaks across America.

Trump also insisted on making a link between trade and immigration, in his latest mini rant on Friday.

Mexico has taken advantage of the United States for decades. Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!

The auto sector - and the 10m jobs it supports - relies upon the North American supply chain and cross border commerce to remain globally competitive. This is especially true with auto parts which can cross the US border multiple times before final assembly.

Any barrier to the flow of commerce across the US-Mexico border will have a cascading effect - harming US consumers, threatening American jobs and investment, and curtailing the economic progress that the administration is working to reignite as efforts are underway to pave the way for ratification of the agreement in Mexico, Canada, and the US Congress.

2.38pm BST

US stocks have fallen, as Wall Street adjusts to Donald Trump's decision to impose tariffs on Mexico linked to reducing immigration.

The S&P 500 fell by 28 points, or 1%, to 2,760 points. The Dow Jones industrial average fell by 255 points, or 1%, to below 25,000 points, while the Nasdaq composite index fell by 1.2% to 7,475 points.

2.25pm BST

Ever wonder what David Cameron is up to, as he watches his successor's final days in office?

Related: David Cameron takes job with US artificial intelligence firm

12.46pm BST

While fighting running trade battles with China and Mexico, Donald Trump is coming to town next week. On the agenda: lunch with the Queen, breakfast with the prime minister (Theresa May, that is), and a lot of protests.

Trump has already put the cat among the pigeons with his recent favourable comments about Boris Johnson, the frontrunner to replace May, and Nigel Farage, the leader of the Brexit party.

12.21pm BST

Companies bidding for public sector contracts will be forced to take radical steps to tackle the climate crisis under new regulations being proposed by the Labour party, addressing energy use, greenhouse gas emissions and waste.

Related: Labour would force firms to fight climate crisis or lose contracts

12.18pm BST

The government has reappointed Ben Broadbent as the Bank of England's deputy governor for monetary policy, effective from 1 July 2019.

11.56am BST

At 3:12pm BST precisely the system which serves England, Scotland and Wales will have gone for two weeks without coal, according to the National Grid Electricity System Operator.

We can now confirm that Great Britain's electricity system will pass the fortnight mark for no coal generation this afternoon! The last coal generator came off the system at 3.12pm on 17th May - meaning we will achieve #coalfreefortnight at 3:12pm today!!

Related: Britain passes one week without coal power for first time since 1882

11.33am BST

As we approach midday in London the major European stock markets are all in the red.

The FTSE 100 is down by 71 points, or 1%, at 7,146 points, while the mid-cap FTSE 250 is down by 0.9%.

11.04am BST

An interesting perspective on how China - the true target of Trump's trade ire - will react to Trump's fickleness, from Simon Baptist, chief economist at the Economist Intelligence Unit. He said:

Trump's tariff threats to Mexico are going to make it more difficult to reach a trade deal with China, as they damage the credibility of the US as a negotiating partner. Chinese academics and media have already been pushing the narrative that Trump cannot be trusted, even harking back to never-ending US demands on Japan during their trade war back in the 1980s.

This move against Mexico will just reinforce China's view that Trump cannot be trusted and that any deal will just be a prelude to more demands. So they will see even less point in trying to reach a deal, and will certainly be less willing to make meaningful concessions as it is hard to see a credible mechanism to bind Trump to any deal.

10.58am BST

Has Trump increased the risk of a global recession?

Paul Donovan, chief economist at UBS Global Wealth Management, likes to characterise tariff increases as tax hikes on consumers - because there is little evidence that the costs are not simply passed on in the form of higher prices.

The proposed tax of 5% rising to 25% on imports from Mexico is a double hit. Mexico had been taking market share from China by selling products from the September 2018 trade tax list. If Mexican goods are taxed, US consumers will find it harder to evade the China trade taxes.

The bigger economic risk is uncertainty. The US economy, and the world economy, has spent a quarter of a century building growth on long, complex supply chains. If those supply chains are at risk, companies will need to rethink their business models.

Not only does this introduce a fresh set of headwinds for the global economy and increase the risk of a global recession, but it also injects the potential for instability in the international monetary system between the US, the world's biggest debtor, and China, the biggest official holder of US Treasuries.

10.43am BST

In case you missed it last night, there was some interesting corporate news from the US that did not relate to Donald Trump: Uber's first quarterly report.

The ride-sharing company lost more than $1bn (790m) in the first three months of the year, writes the Guardian's Dominic Rushe.

Related: Uber loses more than $1bn in first quarterly report since IPO

10.38am BST

Take a look at the Mexican peso today against the US dollar - under severe pressure from Trump's tariff threat on imports to the USA.

The currency has lost 3.1% so far today, its biggest one-day fall in seven months. One US dollar will now buy 19.7 pesos, the most since the end of last year.

10.25am BST

Elsewhere on markets, it has been a quiet week for sterling against the euro and the dollar, but the currency is still on track for its worst month since May 2017.

Against the euro the pound is down by 0.3% for the day, but it is down by more than 3% for the month thanks to the political turmoil of losing a prime minister and the possibility her replacement will choose to take the UK out of the EU without a deal.

10.20am BST

British government debt is also rallying as investors look for safe havens.

The yield on UK 10-year gilts hit a low of 0.861% - the lowest since October 2016 - as prices rose.

10.17am BST

UK banks approved 66,261 mortgages in April, a three-month high and more than economists had predicted, according to the Bank of England.

House price data earlier in the day from Nationwide suggested that prices fell during May, but the stronger performance from the comprehensive data from the Bank suggest that the prospects for a sustained fall in prices may be slim.

9.51am BST

The early judgements of Theresa May's achievements as prime minister have not been very kind, to put it rather mildly. But British business leaders have hit on one thing she could do to secure something of a legacy before she resigns on 7 June: put into law the target of net-zero greenhouse gas emissions by 2050.

By being the first major economy to legislate an ambitious, domestically achieved net-zero target supported by a comprehensive policy package, the UK can show leadership on a global level while strengthening the UK economy. This action would position the country as a strong host, as the UK bids for COP 26 - a critical moment in global action to tackle climate change and an opportunity to leave a legacy of clean growth across the UK.

We are doing this because we see the threat that climate change poses to our businesses and to our investments, as well as the significant economic opportunities that come with being an early mover in the development of new low-carbon goods and services. But we need effective, long-term policies to support the investment and innovation required if the UK is to accelerate the necessary transition and ensure it is delivered fairly.

9.25am BST

Whitbread, the owner of hotel chains such as Premier Inn, has announced a plan to return another 2bn to shareholders through a share buyback.

9.18am BST

Italy's GDP growth has been revised down for the first quarter, underlining the predicament faced by the eurozone's third-largest economy.

The economy expanded by only 0.1% in the first three months of the year, statistics agency Istat said.

#Italy #GDP Growth Rate QoQ Final at 0.1% https://t.co/4KYXd8Q0GK pic.twitter.com/OJfcplFrui

9.10am BST

Indeed, there are now European sovereign bonds worth a3.71tn which have negative yields, according to bond trading platform Tradeweb.

That means 48% of all European sovereign debt is negative-yielding, the highest since September 2016.

9.03am BST

The flight to quality following Trump's tariff shock has added to a bond market rally, with yields on German 10-year bunds moving to almost match the record lows hit in the aftermath of the Brexit referendum in June 2016.

8.49am BST

Germany's Dax index is generally more export-sensitive than other indices. It also has major carmakers BMW, Daimler and Volkswagen, all of whom have plants in Mexico.

8.36am BST

Back on Trump, the car industry will be one of the hardest hit by the president's decision to impose tariffs on Mexican imports to the US.

The Stoxx index tracking automotive manufacturers and suppliers is down by 2.7% in reaction to the announcement, below the 1% fall on the broader Stoxx 600.

The main event in the import-export flow as always is autos, and the two-way traffic of imported parts and finished vehicles is far more complicated than a blanket import tax might take into account. Many US operations depend on that parts flow (coming and going).

8.19am BST

The avoidance of a no-deal Brexit at the end of March may have provided some support to housing market activity.

Certainly, latest survey evidence on the housing market remains largely downbeat.

We believe with Brexit being delayed until 31 October - and it currently very unclear what will happen then - and the domestic UK political situation volatile, prolonged uncertainty will weigh down on the economy and hamper the housing market.

8.11am BST

Let's get some reaction to the Nationwide data showing that house prices fell in May (before diving back in to the Trump-Mexico standoff).

Prices have hovered near the same level for a year or so now, according to Nationwide's data.

The trend likely won't improve in the next couple of months, given the political deadlock in Westminster. [...] Nonetheless, consumers' confidence recovered in May, while the labour market remains robust, with official vacancy data still pointing to steady growth in employment ahead.

In addition, mortgage rates have held steady for low LTV [loan-to-value] loans and have fallen steadily over the last year for high LTV products, improving the attractiveness of house purchases for first-time buyers. The recent fall in interest rate expectations - 20bp over the last month at the five-year horizon - should feed through to mortgage rates over the coming months.

8.02am BST

European markets are in retreat as investors take in the prospect of another round of trade anxiety - this time on the relationship between the US and Mexico.

The FTSE 100 fell by 60 points, or 0.8% at the open to 7,154 points.

7.56am BST

The British housing market cooled in May, with economists expecting the market to remain flat in the coming months.

7.41am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Donald Trump has come under intense pressure in recent days, after special investigator Robert Mueller made it clear that he was not confident that the US president had not committed a crime in obstructing justice. What better way to distract from that than dropping a bombshell announcement on trade?

On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,..

....at which time the Tariffs will be removed. Details from the White House to follow.

This surprise announcement, coming as it does in the wake of the recent new trade agreement USMCA [US Mexico Canada agreement], was completely unexpected and could well upend the whole agreement.

It also makes it much more difficult for countries to take the US at its word when it comes to trade negotiations if its president can so easily lob a hand grenade into the path of an already agreed deal.