breaking news on this friday, there is a new front in the trade war. stocks set to plunge president trump threatening tariffs on mexico. mexico responding in a big way, and industriesfrom autos to railroads to oil suddenly thrown a massive curve ball will this political move backfire it is friday, may 31st as "worldwide exchange" begins right now. good morning, good afternoon,

good evening, welcome to "worldwide exchange. it is 5:00 a.m. here in the united states, 4:00 a.m. in mexico city where officials are scrambling to teadeal with the mexico surprise. president trump threatening tariffs in a bid to control illegal immigration. stock futures are deep in the red dow futures are down 236 points, and of course as we have noted. futures at this hour have tended to understate recent market moves. now we're weak across the board, and all this coming in an already weak and declining stock market may has been the worst month of the year, the worst month since december buyers as they sell here are flocking into bonds yet again, and the yield on the ten-year treasury note, wow, all the way down to 2.56%. we're seeing the five-year go under 2% as well that is the lowest level from the ten-year in just about two

year's time. stocks in mexico are likely to take this move politically hard. our trade with mexico is far larger than trade with china the big u.s. etf to watch is that, it is the eww down 7.5% right now in the premarket you also need to watch currencies, the mexican peso u.s. dollar relationship that is an inverse relationship, so that move higher means the peso is going down as the dollar goes up. it is already down a few percent on this tariff shock we have got you covered in every angle here on cnbc let's get more of the news that came as a surprise to everyone tracie potts live in washington with more details. >> reporter: good morning everyone all that red you were showing on the futures may reflect the fact that a, this was a surprise but also reaction from democrats overnight on twitter saying this

is asinine that's the word they used, these tariffs that president trump not only doesn't understand imfwr s immigration but does not understand basic economics this tariff, 5% on everything coming across our southern border increasing every month to a permanent 25% unless they do something to the trump administration's satisfaction to stem the flow of illegal immigration across our border. what that something is the white house did not specify. we're getting reaction from mexico, mexico's president holding a news conference this morning, but also saying in a letter that taxes aren't the way to solve this immigration problem. he's sending his foreign minister to washington to try to deal with it today as you've already seen certainly the markets reacting to this unexpected news of this growing international trade war, not only now with china and europe but also with mexico right in the middle of the united states trying to work a trade deal with mexico, canada, and the u.s.

>> when does congress come back into session >> back next week, we're starting to hear and will likely hear more today from some lawmakers reacting to the president's unexpected news. >> thank you very much. joining us is the jimmy pet cue kis of the american enterprise your reaction to >> my reaction if i were one of the national leaders in the war trump has launched against them on trade, i would be wondering why do you want to do a deal with the united states, if we do a deal and yet the tariffs could still come back. they have to be thinking that in beiji beijing. remember yesterday's gdp report, that number was not very good. this will only make that worse.

>> we've got to remember the tariffs do not go into effect for another ten days, june 10th. is there a chance they never go into effect? is there a chance mexico can do something that would placate president trump where he would delay or cancel this idea? >> i think it's likely those 5% go in efbfect there's a seasonality with these immigration flows. they may decline naturally the president could easily say i've talked to the mexican government and already we're seeing the impact. if you read that letter from the mexican president to washington that they just put out, that was not one of the beautiful letters that the president likes to hear from foreign leaders that was a very confrontational letter, and he has a domestic audience he needs to appeal to like other foreign leaders do, and i doubt they're going to cave i'm not sure what they can do. i think it's a difficult problem, and if it was easy to solve it would have been solved. >> i guess the irony is if these

tariffs go into effect, and if the mexican economy like the market is suggesting is indeed hurt, wouldn't mexico have less economic resources with which to fight this battle they're fighting on their own southern border immigrant flows could grow because mexico would lose resources to battle their own needs. >> listen, the u.s. and mexican economies and fates are highly intertwined, and bad news for mexico you're exactly right. if you want to increase flows, this would be a great way to do it hurt the mexican economy and more people will flee north, you know, to u.s. jobs and u.s. opportunities here it doesn't make a whole lot of economic sense on the trade front, nor does it make a whole lot of sense on the immigration front. >> do you think this might prompt congress to try to limit president trump's authority on trade? >> listen, i think you have lost a lot of money betting that the congress is going to limit the president's authority any number of issues.

this is a big one. it really looks like he's misusing this national security component just to be able to create unilateral tax increases which is what these tariffs are. i still think it's doubtful that could get by a mitch mcconnell led senate. >> when we started the trump tenure we had that ceo council they would come in and meet. that was dissolved primarily by the ceos if you're the ceo of a u.s. auto company or an auto parts company or a railroad, do you dare pick up the phone today, try to get in touch with the president and say listen, mr. president, we're already dealing a lot of different things around the world. now is not the time. >> i think you could try that. i think given the president's behavior with china that he might say are you not a patriotic ceo? we have patriotic farmers. now it's time to have patriotic

auto ex auto executives. >> if the president wants to recreate manufacturing and the supply chain in the united states, that's well and good the reality is even if you're a u.s. company who wants to do that, jimmy, there's no way you can do that in the next year maybe the next two to five ye s years. >> that's sort of been the big question to what degree does the president want to do that. the advisers want to repate yacrepateuate those supply chains. if that's what the president wants we are in a world of economic hurt over the next few years. this isn't supposed to be about that this is just supposed to be immigration flows. we'll see if he broadens the picture. >> very quickly, how happy is china this morning >> if i'm president xi, i turn around and say listen, not my fault. we can't do a deal with this guy. if this thing blows up, this is trump not me >> always a pleasure to get your

views on a very important topic. thank you very much. stock futures are deep in the red today in what has already been a tough month for stocks dow futures with an implied opening down about 217 right now. s&p and nasdaq off just under 1% as well. buyers flocking into bonds continuing the recent trend. the ten-year yield at 2.16%. joining us now is noah weissburg, managing director of u.s. portfolio streenl highways former staff economist with the white house council of economic advisers. on two levels you are the perfect guest to have on cnbc this morning, and we appreciate it what is your reaction to this may mexico surprise? >> i think this comes object hee o the heels of a u.s. economy that's been slowing. it comes on the heels of uncertainty about china. we've taken a more moderate approach in terms of how we see equity upside from here. we think this does add to the

downside risks we'll get some of that news early next week and we'll have to see how that plays out from there. that will be the critical thing to look at where we've thought about the trade issues would be on margins where we think the tight u.s. labor market is already increasingly a headwind, although probably not this year more into next year. >> do you say to your team, listen, we've got to start thinking about taking down our numbers for gdp, for eps, for profit margins do you got to reanalyze those figures this morning >> i think you need to take a look whenever you get a piece of news like this we don't want to overreact at the end of the day, a 5% tariff which may or may not be permanent. the idea is to be a little prudent. i do think you want to think about what the downside scenarios are. the number we've had out there

already on the back of china has been 26506789 we think 2650 is the where s&p 500 goes if we see 25% tariffs on china that hits u.s. margins, that shaves eps by $6 that multiple is a big deal. that expresses how confident market participants are in that forward earnings estimate. maybe that floor comes down a little bit it's not a massively lower floor but we think that's kind of where those numbers end up. >> at some point do bond yields 2.16% on the ten-year, at some point if bond yields get so low that you have to buy stocks, almost inversely you've got to go into the equity market, there is no alternative theory. >> i think some of that no alternative theory, where do you get some return for the risk you're taking with term premium negative in the bond market. that seems to be where the investors are flocking the move we saw from lows to start the year from now probably reflects a surprise from the

fed, and from here on in, what we're seeing in the bond market may be a shift federal reassessment of the fed's reaction a little more to the reassessment of growth prospects. even if bond equities offer a little more return, you're still going to be taking down your growth numbers i'd be worried that the paradigm shifts from a moment in time where we saw yeelgds doields dos up >> i know since december your model portfolio was actually out performed the bench marks by 2%. nice job there you added names like cvs would you feel like a cvs or a health care company, are they immune to this trade fight >> to the trade fight, yes, to other political cross winds no, of course. i think the idea in a trade war is you move away from the cyclica cyclicals. move away from those with global supply chains, and those are the

things that also rallied the most to start the year even as key indicators were slumping to start the year, we saw cyclical performance, and that motivated us to take down some of our cyclical exposure them autos, semis, hardware, not software, not services, not health care we think is where you'll continue to see headwinds. >> noah i think you and your team have got a will tlot of woo do this morning. thank you very much. still ahead, more fallout from president trump's mexico tariff threat and why chinese officials are probably smiling this morning and as we head out, who could be hurt the most in your portfolio if these tariffs take effect here are the companies with some of the biggest sales exposure to mexico union pacific, kansas city southern, pepsi co we'll groif more names ados w futures down 221, and we're back right after this more names as w

futures down 221, and we're back right after this i more names as futures down 221, and we're back right after this ve more names aw futures down 221, and we're back right after this ♪ every day, visionaries are creating the future. ♪ so, every day, we put our latest technology and unrivaled network to work. ♪ the united states postal service makes more e-commerce deliveries to homes than anyone else in the country. ♪ because the future only happens with people who really know how to deliver it.

because the future only happens with people hey! i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again?

you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. breaking news, u.s. stock futures are pointing to heavy losses at the open on this friday capping off what will be the worst month for wall street so far this year futures off 220 on the dow all this as president trump says the u.s. will impose 5% tariffs on mexican imports beginning on june 10th until illegal immigration across the border is in the president's words remedied those tariffs will only begin at 5%, and then he has threatened to move them higher in

increments to as high as 25% until that situation at the border is resolved to the president's satisfaction this new front in the trade war making big headlines in china as well where officials there are likely surprised and possibly pleased with this development. eunice yoon is live. >> reporter: china doesn't have any official reaction to the news but beijing leadership is probably pretty pleased with president trump's latest announcement, and that's because beijing had been wary of the usmca that the u.s. could potentially use a clause in it to undermine beijing's own relationship in trade with canada as well as mexico, and that's because the clause is aimed at limiting ties for the three countries to economies considered non-market. mexico has also been seen as a winner in the u.s./china trade war. there are several american companies here who have been either considering or are

already shifting production from here to mexico because the tariffs on chinese goods are so high, and also, beijing has been attempting to project itself as the stable leader in contrast to washington so as for the trade talks themselves, the latest announcement by president trump is probably not going to be instilling a whole lot of confidence in the chinese negotiators that they can do a deal with the u.s. and have it stick. in fact, today a former central bank governor who is quite influential told a seminar in beijing that he didn't see any progress on the trade talks even if the two presidents were to meet at the g20. instead what's likely going to happen that beijing is going to hunker down and stick with what appears to be its current strategy and that is to wait it out. >> it's not all about this fight. we also had trade data or

economic data in china today, eunice, that was a little weaker than expected? >> reporter: yeah, that's right. it was the pmi, the manufacturing pmi came in quite a bit weaker than what people were expecting it showed that the pmi fell to 49.4 in may from 50.1 in april and also missed the estimate of 49.9 the new orders fell for the first time in four months, and that's been prompting a lot of economists and analysts here to now believe that the chinese government is going to have to continue to stimulate this economy, especially if the trade conflict with the u.s. just continues to get worse >> all right, eunice yoon live in beijing, thank you very much. we appreciate it to show you an example of the reaction out there, the former mexican ambassador to china who now works in washington, d.c. said this. what a great day for china, xi jinping is having a great day now that he can show his people

he did not miscalculate in the trade negotiation with the united states. he can credibly make a point there is simply no deal to on made with trump. still ahead, the one industry that could be hardest hit by the mexican tariffs and one the president may need politically to wren wyin re-ele and uber needs a lift, the intsking lost it posted i first quarter as a public company. we're back after this. ♪lean on me, when you're not strong.♪

♪and i'll be your friend.♪ ♪i'll help you carry on.♪ ♪lean on me.

welcome back, it is 5:22 here on the east coast if you are just joining us this morning, it could be an ugly day for stocks and your portfolio. futures indicating a big move down dow futures off 240 right now, this as president trump threatens to impose new 5% tariffs on mexican imports beginning on june 10th the president says those tariffs will go up until mexico does more to slow illegal border crossings into the united states that 5% number is just the beginning. the tariffs will rise to 10% jug 1st, 15% on august 1st and once more to 25% on october 1st our trade with mexico far larger than china, about 70% bigger if we go to 25% on the total value of those imports, that could be about $87 billion paid by u.s. importers. while we keep an eye on the tariff situation here are three

other big stock stories to watch on this friday costco, that stock down a bit. it says it is tackling the latest round of u.s. tariffs on chinese goods by sourcing those goods from other countries and maybe having to raise prices two, the gap, first quarter results missing forecast, the company cutting its outlook for the year it posted its biggest drop in same store sales at the name sake gap brand that stock is down 13% in the premarket. ouch and three ulta beauty off 3% the cosmetic retailer first quarter earnings did top estimates fractionally, but same store sales came up just shy of forecasts. market doesn't like it here's a question, what if a company lost a billion dollars in 90 days but the markets didn't seem to care. that's what's happening with uber right now. uber reporting a $1 billion loss in the quarter as costs grow for

drivers and food delivery. that was in line with the company's estimates and revenue did rise 20%, which was at the high end of the forecast joining us is ben harbourg, but are you surprised the stock is actually mildly higher given that they lost a billion dollars in three months? >> i'm not i mean, i think it still performed better than expects and a lot of the new business lines where this whole platform play really comes to light are doing incredibly well. you saw uber eats up 108%. i think they're proving they can start to integrate their value chain and maximize utility of the cars they have in their fleet and drive a lot of value through that. >> what was the most positive takeaway from the quarter? >> i think it has to be eats,

right? so the business, you know, grew its revenue by 89% it has about 25% of market share in the u.s. and is also doing well globally. its nearest competitor, something like door dash values itself in the private markets at about $13 billion. that's not too far off from what lyft is valued at. this is a business that proves this platform works. freight, micro mobility. everything makes sense we know that model well here in china where you integrate things across a value chain that fit well into each other sequentially we're really excited about how those businesses can grow and ultimately one day i think some could be more valuable than the current market share of uber you see someone like uber eats being in that ballpark or even the stake in didi,.

>> what were you disappointed with >> i think the take rate's still relatively low >> what is the take rate what does that mean? >> sure, so the amount that they're taking as a margin after they've given money over to the drivers and covered costs. so essentially their margin on each transaction decreased a bit. it's about 18% it's been as high as 30% in their core business over the period the take rate on uber eats was 8% ben harburg joining us from china. on deck, just how will mexico respond to this may surprise on tariffs. we will take you back to washington stocks set to sell off futures down 243 we'll tie it all together r u d owouushow big trade with mexico really is. stick around

a new front on the trade war this friday morning has stocks shocked, futures plunges as trump threatens tariffs on mexico mexico responding but corporate america is nervous as the united states may now be fighting a trade war on two fronts. the full fallout as "worldwide exchange" rolls on right now welcome back, and good friday morning, i think, and

thanks for being with us here on cnbc i am brian sullivan. pour yourself another strong cup of coffee. it is shaping up to be a big market day a lot of things are in flux. stock futures, this they are deep in the red. dow futures are indicating a drop of nearly 260 at the open all this as president trump threatens to impose a round of tariffs on mexico starting at 5% on june 10th, moving up to 10, 15, and then 25% by october. if they do not stem the flow of migration over the u.s. border it is not just stocks the bond market, which has already been on a big move this month continues the move look at that the yield on the ten-year treasury note down to 2.16%. that is its lowest level in nearly two years stocks in the mexico, they could be the international market to watch as well. the biggest etf, there's a couple, but the big one is the eww, and we have a premarket

trade on that, and it is ugly. the eww down 7.4% right now. what else is down is the mexican peso the yen is rising but watch the peso remember, this is an inverted chart, so as that line goes up, that's the dollar. that means the dollar up against the peso, which means the peso is going down this morning there's your numbers let's get more on the news and the president's new trade threat kayla joining us now with more on the cnbc news line. there's no other way to describe this other than a may surprise on the trade fight. >> yes, and of course a 5% tariff is lower than the tariffs the president has threatened and has implemented on other goods in other countries, but it is a surprise not only because it would take effect so quickly but also because the president is currently trying to get mexico to pass the u.s. mca, the new nafta deal and asked yesterday

by reporters whether this would imperil that strategy, the acting chief of staff mick mulvaney told reporters this is totally different, that the administration is using its emergency powers to try to stem the flow of migrants coming into the southern border of the united states by using these tariffs, and it is not linked to any economic issues, which does raise the question of why the administration is using an economic instrument. they do believe the u.s. mca will not be imperilled by this strategy members of congress have already been critical. senator chuck grassley who is one of the leading senators on trade issues put out a statement saying he agrees with most of the president's policies but this is not one of them. he calls it a misuse of presidential authority and thinks that these tariffs are completely the wrong way to go about this and would imperil the u.s. mca we are still waiting to hear from mexico on this front. officials spoke to reporters

yesterday said they hope that mexico's government responds in a sufficient way such that the administration doesn't have to put these tariffs in place on june 10th, but as to when those tariffs would escalate, if mexico does not respond in a sufficient way, mulvaney told reporters, the administration is taking this on a day by day, week by week basis >> you know, kayla you make an important point. the tariffs have not been implemented yet, we still have ten days, maybe eight or nine actual working days. congress coming back into session on monday, so they're not even there to deal with this in washington, d.c does anybody that you've spoken with -- and i know it's late last night and early this morning since it's come out, believe that mexico has the capacity to do anything that would please the president enough where the tariffs would not be enacted >> well, the acting homeland security secretary was asked what would constitute a win for the united states on this front, and the administration makes it

clear that they want to slow the flow of migrants they believe that it has reached emergency levels, that the u.s. is currently averaging about 3,500 people crossing border each day, and that is up from an average of about 700 people crossing per day historically, and so they believe that this is a problem that has reached historic and emergency proportions. that being said, it's unclear what exactly would constitute a win on this front and what the administration is looking for from mexico, whether that would be completing slowing the flow of immigration into the country whether that would be a 50% drop or something smaller, some sort of policy outcome. we will wait and see what is sufficient for them, and what is sufficient for the president who has put this policy in place. >> what is dropping right now, futures, they continue to leave steam. dow futures down 262 points. as we have mentioned before, for all the attention that china

gets in the ongoing trade fight, one of our biggest partners is right next door and that is mexico according to the latest data, the united states imports $346 billion worth of goods from mexico compare that to 558 billion from china. we buy more from china than mexico, but a 5% tariff on imported mexican products would i amount to a tax increase of americans of more than $17 billion. when it comes to exports, mexico is far more parent important to companies than china we actually export $300 billion worth of goods to mexico each year but only $179 billion worth of goods to china. in other words we sell or trade more to mexico than to china by the tune of 67%. bottom line is this, mexico is not only bigger in terms of total trade, it is bigger in terms of what we stole them as

well. the markets are reacting as we note instead a big way to that new trump tariff threat joining us now on the cnbc news line, fast money trader. guy, we had jim cramer chiming in he tweeted this morning kind of stunned by the mexican tariff. i dislike things totally from left field like this during important negotiations over the u.s. mca, the new nafta, which have positive implications do you agree are you concerned and surprise bid this move? >> you have to be concerned, i think if jim's surprised count me as surprised. now the president's fighting multiple wars on multiple fronts, and if he's successful that's great, and you know what? maybe this needs to be done, and maybe we do need to push back on the chinese. maybe we've been getting ripped off, and maybe this is the right course of action with that said it has huge market implications, and to think the market is not going to react to it is foolish

it also comes at a time in my opinion when earnings are slowing and things around the globe aren't that great for other reasons not related to china trade and obviously the news we have now so in certain ways he's playing with fire, but if you recall, i think the president believes that in the stock market with the gains he's seen during his administration, he has a lot of equity to play with, no pun intended i think he feels as if he can use some of that equity as a bargaining chip. i think he's okay with the market going down for a period of time, but obviously at a certain point, and he has said it multiple times, the stock market's a report card for his administration really the question you have to ask yourself is how long will he allow this to last before he blinks. >> there are many on the street, guy, who may agree and say we need to fight with china if we have to take short-term market pain, that's fine here's the thing, if you're a wall street analyst. if you're a fund manager, a

wealth manager, all these folks that watching cnbc all day long, how do they model any numbers when you have no idea what many of these publicly traded companies are going to have to spend on eefither tariffs, taxes or supply chain adjustments. >> you can't model, and that's embedded in your question. i think you understand that, and i think probably the market understands that what surprises me and maybe surprises you and your viewers as well is the fact that the volatility index still has a 17 handle on it if you had told me all these things would be taking place six months ago and you'd ask me where the vix is i'd say north of 20, 25. i think there's still a latent complacency in the marketplace which should be alarming, i think. now obviously today or at least this morning you'll see the vix rally, you just wonder how sustained that will be i think we're at a point in time in the market where, you know, people say it's only panic on the downside

well, you can make an argument that from december 24th until recently, until the recent highs we made, i mean that was equal panic to the upside. the market can be irrational not only to the downside, but to the upside as well i think we're sort of paying the price for the last few months. i've said it to you a couple weeks ago. i'll say it again. i think an acceptable level in the s&p in terms of a pullback from this recent high is 2650, and now with this move we're seeing this morning, we're probably within 3.5 or 4% of that. >> i know mexico getting the attention, it's breaking news last night as you and i have talked about and you and mel and the gang on fast money have talked about many times and i think very smartly, it's not just about trade. there's other stuff happening in the world on top of all this, particularly deutsche bank, its stock down 25% in 90 days. the italian banks, there's no other word other than collapsing right now. you've got a europe which is in real jeopardy as well.

i wonder if that's the thing we're not paying enough attention about, which really could be -- i don't want to call it the black swan, but could be that sort of side variable that shocks everybody in the end. >> brian, i appreciate you pointing that out. deutsche bank has been something we've been discussing literally for the last couple of years again, black swan, i don't like terms necessarily, but what i will say is this if deutsche bank was a united states bank, we'd talk about it on the network every single day. the fact that it's not is one of the reasons we don't if you don't think there's systemic, potential systemic risk there, you're not paying attention. i'm not suggesting there is, but i'm also not suggesting there isn't. too many people just sort of pass it off as deutsche bank specific where if you think about it, deutsche bank has the largest derivatives in the history of mankind to think there's not counter party there i think is foolish if you're looking for proof positive, look at how poorly

relatively speaking citi bank has traded over the last couple years, probably the biggest u.s. bank with the biggest european exposure, and i think that's telling you something, so i think you're going to wake up at one point and say, you know, deutsche bank's a problem. everybody's convinced germany is going to bail them out that might be the case i don't think that's a solution if there is a counter part risk. >> guy, we're going to show our viewers, the german bund at 5:30 in the morning, my gosh, it's now negative yielding 0.2%. i mean, you're supposed to get money when you lend your money out to be borrowed it actually costs you money to lend money in germany now. how insane is that. >> think about that, germany's the fifth, i believe it's the fifth largest economy on the planet when the fifth largest economy ten-year-year-old is negative 20 basis points, again, that's problematic. i'm not trying to be glib here, and i respect the opinions of everybody but you hear over and

over again that it's different this time, and the fact that bond yield, you know, curves are inverting. it's different this time when you think about it, if north of 20% of sovereign bonds globally have negative yields, that has to be almost by definition problematic again, i'm not an economist, but if you just think about it intuitively, it's not good. >> guy adami, you're good. thank you very much, buddy. >> thanks, brian. still on deck, president trump opening a new front in the global trade war this time taking aim at mexico no industry more hit than autos. we're going to get a closer look at that and talk about the impact on oil and the u.s. shale book as well a lot of angles. more to come we're back after this. ♪ ♪

♪ ♪ applebee's new loaded fajitas. now that's eatin' good in the neighborhood.

there is no single industry to watch more this morning than autos and auto parts that is our number one trading partner with mexico. gm is the biggest automaker in mexico they've got 14 plants there, and that stock is down 3% right now. nissan's exports from mexico, they account for roughly a quarter of its american sales, 1/4 of the nissan cars you see on the road are built in mexico. that stockdown in japanese trading more than 5% this morning. automakers have long built cars and trucks in mexico taking advantage of the proximity to the united states available of rail and cheaper labor, the u.s. importing 2.7 million cars from

mexico last year, and according to deutsche bank in a note late last night, cars, trucks, buses, and auto parts are the four biggest export items to the united states totaling $93 billion in goods so watch gm, watch nissan, watch the auto and auto parts companies today. it's not just that, trump's tariffs threat could have a big impact on the energy market as well why you say? because the u.s. currently imports about 700,000 barrels per day of oil from mexico a 5% tariff on that could possibly serve as another big boost for the american shale industry joining us now is charlie lakimi founder and partner at csl capital management investment bank based in houston. we want to talk about the permian boom, and we will, but now we're going to frame it with these tariffs, if we see a tax on imported mexican oil, can that give a u.s. shale boom

another leg higher >> i think it could be a positive impact for the u.s. players on two levels. first, mexico's an important energy trading partner we export about 1.2 billion feet of natural gas to mexico ask a million barrels per day of products it is an opportunity both for natural gas and oil related products, businesses that touch upstream as well as midstream and downstream. >> 12.2 million barrels, much of that is in the permian what you try to do at your firm is try to raise money to help service these companies exist, and we've seen a lot of them go away do we have the money do we have the manpower to increase our production, charlie? >> brian, there's really two challenges the first is capital right now as a percent of the s&p, energy has been trading at its lowest level since the dot

com boom in 2000 it's at 5% s&p at one of its lowest levels. from a capital perspective, the public markets have not been very friendly to oil and gas and energy more broadly. from a people perspective, there are still challenges both in terms of recruitment as well as in terms of training and getting people in the right positions in the industry i think from a -- from an overall perspective, it's still more of a challenge than an opportunity, and again, having the lack of capital markets both public and private, the lack of debt markets does create a lot of constraints. >> where are the best economic opportunities right now for your clients, for our viewers >> so as a fund, we focus entirely on the private market we also focus across the entire value chain. where we're seeing the best opportunities right now is both in the upstream but more importantly in the midstream there's been a huge buildout of pipeline capacity to support the

big permian buildout over the last three careers. >> even with tariffs on aluminum and steel. >> there's been a significant buildout of oil products, natural gas related exports to the gulf coast all sorts of buildout in the gulf coast that creates significant opportunity for service businesses looking to do construction, engineering, also maintenance and technical services as a fund, we're mostly interested in the technical services that go along with the midstream buildout. >> really a tariff impact on everything particularly in oil and gas, an industry maybe not getting enough attention in the tariff fight we appreciate you coming on. >> thanks very much. straight ahead, the top u.s. companies that could be caught in the cross hairs of this new trade threat with mexico we'll give you the specific names to watch that have the highest sales exposure to mexico stock futures, they are down big, nasdaq and s&p down over a percent. a lot more to do, and we're back right after this

every day, visionaries are creating the future. so, every day, we put our latest technology and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country.

e-commerce deliveries to homes my mom washes the dishes... ...before she puts them in the dishwasher. so what does the dishwasher do? cascade platinum does the work for you, prewashing and removing stuck-on foods, the first time. wow, that's clean! cascade platinum. there's just one thing hurting us millennials more than student loans: credit card debt. but with a personal loan from sofi, you can consolidate your credit card debt into one monthly payment. get your money right with sofi.

good morning, if you are just waking up, make that coffee extra strong it is shaping up to be a big market day dow futures are plunging, and the losses are accelerating. we're down 277, more than 1% across the s&p, dow, and nasdaq futures. this after president trump last night threatened to impose a new 5% tariff on mexican imports beginning on june 10th but that's not the whole story, they will start at 5%. if the president does not get what he calls relief at the border, what he wants is mexico to sort of tighten its border controls so fewer undoumtcumentd immigrants will come across into the united states. if he doesn't get relief, he's going to raise the tariffs to 10% on july 1st, to 15% on august 1st, to 20% in september, and max of 25% on october 1st on 300 billion worth of imports

that's about 90 billion u.s. dollars. many u.s. companies have significant sales exposure to mexico, and with all credit out there to dominic chu, last year he showed you these and we're going to revisit dom if you're out there, thank you. here we go, the highest revenue impact kansas city southern. they're a huge railroad with cross border transactions. so is union pacific. we talked about auto parts borg warner gets a large percentage of its sales through mexico energy we just hit oil and gas and american tower, that's right, cell phone towers in mexico, they have got a big exposure kansas city southern the highest percentage of its revenue in mexican sales, and as you might imagine, that stock is being impacted today ksu shares are down 3% let's talk about the entire macro outlook. joining us is alishia levine, chief strategist at bmy investment thanks for joining us on this big market morning what is your reaction to the

news what is your reaction to dow futures that are down 270 points >> hi brian, nice to see you. i'm not surprised to see debt futures down like this my thought on the trade war is that we were going to see 2640 before we ever saw the old high of 2950 again. this is just an example of the fact that we have to take earnings down for the s&p this year. >> is there any way we can argue the market, bond market, stock market is overreacting to the trade fight? >> i don't think that the stock market is overreacting to the trade fight because if you ook at earnings estimates, they actually have not come down this year the news of the last two weeks is that investors should expect that if there's a trade deal with china, it's probably not coming until the end of the year, and in that time you're going to hit earnings. you're going to hit investment, and you're going to compress the multipl multiples, so i do not think the stock market is overreacting here. >> is the bond market overreacting the yield on the ten year is the lowest in nearly two years.

>> you live in interesting times. >> we do too interesting by the way. >> too interesting the bond market is to some extent also reflective the $13 trillion of negative yielding debt globally, so it's not isolated about what's happening with the u.s. economy or what's happening with expectations for inflation we're also subject to asset flows globally, so that's what we're seeing also. >> got about 45 seconds left what do we do? what are you advising your clients to do, alicia. >> the president right now is essentially fighting a three-front war. that's probably not sustainable, i think that the original strategy of, you know, bringing in your allies and going after china was probably a by go >> alicia levine, thank you for joining us on a big market day as well. as we are about ready to go to break we are seeing dow

futures down 270 points. the mexican eww etf off 7% and bond yields at 2.16% thanks forat wching, big market day. "squawk box" is next - learning from him is great... when i can keep up! - anncr: thankfully, prevagen helps your brain and improves memory. - dad's got all the answers. - anncr: prevagen is now the number-one-selling brain health supplement in drug stores nationwide. - she outsmarts me every single time. - checkmate! you wanna play again? - anncr: prevagen. healthier brain. better life.

hey! i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass.

effort to secure the southern border we'll take you live to d.c. for a rundown on the new tariffs on mexico potentially markets responding, dow futures indicated lower by more than 250 points mike santoli is here with reaction and automakers getting slammed on the news. we'll show you what other companies that manufacture in mexico, what's happening, and how their stocks are reacting this morning it's friday, may 31st, yes, there are 31 days in may, 2019 squawk box begins right now.

♪ the devil went down to georgia, he was looking for a soul to steal ♪ ♪ he was in a bind because he was way behind ♪ >> live from new york where business never sleeps, this is "squawk box". good morning, everybody. walk to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe ke kernen and mike santoli. andrew ross sorkin is live this morning, what's going on >> reporter: good morning, becky. i am in atlanta this morning talking to some of georgia's biggest business leaders about the hot button issues from the business worlds from today's big tariff news to taxes and the economy and of course the controversial abortion law that has companies like disney and netflix and our own parent company questioning their presence right here. we're going to bring you interviews including a rare one with tony resler, billionaire fo