They might as well rename America’s large-cap stock index the Standard and Peso 500. The great American equity market on Thursday continued to trade tick for tick with the dodgy Mexican peso.

Shortly after 2 pm, Bloomberg News reported that the Trump Administration was “weighing” a delay in the imposition of a 5% tariff on US imports from Mexico, rising to 25% by October should Mexico fail to comply with unspecified demands about managing immigrants from Central America.

At the same time, Mexico’s Interior Minister Olga Sanchez announced that Mexico would reinforce its southern border to keep Central Americans out. The peso rose and after it the US stock market, repeating the pattern of the past week.

The issue is not merely the prospective impact on the US economy, which would be substantial, but also the possibility that American unilateralism might cause permanent ruptures in its relations with the rest of the world.

Vast amounts of investor attention is now devoted to sifting the influences around President Trump. The departure of Council of Economic Advisers Chairman Kevin Hassett, a free trader who had served as Mitt Romney’s economic adviser in the 2012 campaign, was viewed as ominous, although Hassett denied that tariffs motivated his resignation.

Economic adviser Larry Kudlow, also a free trader, has been out of sight, reportedly because of a hip operation. Stephen Miller and Peter Navarro, the immigration and tariffs hawks in the president’s entourage, have been more visible. Behind the scenes, a flood of warnings from industry leaders about the likely damage from Mexican tariffs and the trade and tech wars with China have been accumulating in the email inboxes and voicemail messages of senior Trump aides.

The President appears convinced that his tariffs on Chinese imports have helped the US economy. The data indicate otherwise. As I reported yesterday, the Automatic Data Processing and Paychex data for US employment both show a significant downturn during 2019 to date. These are private firms that process paychecks for hundreds of thousands of US firms.

The ADP report showed a gain of only 27,000 jobs during May, the lowest since 2010. Small business lost 52,000 jobs, also the worst result since 2010. Virtually all the losses were registered in goods-producing industries – manufacturing, construction and mining. Tariffs are designed to protect American manufactures, yet manufacturing has suffered the most, by all available gauges (including the purchasing manager indices, the Federal Reserve’s index of industrial production, and the Bureau of Labor Statistics’ payroll data).

Small US manufacturers rely extensively on Chinese components, and the tariff-driven price increase for production inputs has hurt smaller shops disproportionately. In addition, as I reported previously, capital spending has fallen year-on-year as companies postpone investment decisions until the dust settles on the shape of the global supply chain. Many US companies who now produce in China had considered Mexico as an alternative. Trump’s Mexican tariff bombshell scrambled corporate contingency plans.

It is uncertain whether the weakness in employment data as reported by the private surveys will turn up in Friday’s payroll data, released by the Bureau of Labor Statistics at 8:30 am EST. The unexpected plunge in employment in the ADP survey occurred among businesses with fewer than 50 employees, a sector that the payroll report tends to capture spottily and late. Large businesses didn’t register a significant decline in the ADP survey.

At some point, the weakness in the US economy will become apparent to the White House, and Trump will have to adjust his policies or face a weakening economy in the advent of the 2020 presidential elections. The question is whether Trump will make the transition in time.