Mexico-Linked Stocks Hit by Trump Tariffs
May 31 2019 - 12:01PM
Dow Jones News
By Sam Goldfarb
Investors punished shares of companies with exposure to Mexico
on Friday after President Trump said the U.S. would impose
escalating tariffs on Mexican imports.
The selling was particularly acute among auto makers and their
suppliers, many of which have significant manufacturing operations
south of the U.S. border. General Motors and Renault both fell more
than 4%. Among auto-parts makers, Lear fell 3.6% while American
Axle & Manufacturing Holdings dropped 3.6%.
Outside of the auto sector, Corona brewer Constellation Brands
lost 6.4%. Kansas City Southern, which has a major rail network
that runs through the central U.S. and Mexico, slid 6.1%. And Union
Pacific, which has a minority holding in the Mexican rail company
Ferromex, declined 2.4%.
Mr. Trump said in a tweet late Thursday that the U.S. will
impose a 5% tariff on all Mexican imports starting June 10. The
tariff rate would grow steadily, hitting 25% on Oct. 1 unless
Mexico takes what Mr. Trump deems satisfactory actions to halt the
flow of migrants to the U.S.
The threat added to investors' concerns about rising trade
barriers and the Trump administration's aggressive use of tariffs
as geopolitical weapon, which some analysts say could hinder a
resolution to the U.S.-China trade battle. Some investors and
analysts are worried that rising trade tensions could slow the
global economy and thereby hurt corporate profits.
Roughly two-thirds of U.S. imports from Mexico occur between
related party companies, in which one firm owns at least 10% of its
trading partner, according to Deutsche Bank. In addition, roughly
35% of auto exports from the U.S. included foreign-made parts, as
of 2011, underscoring the increasingly global supply chain of the
industry.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
May 31, 2019 11:46 ET (15:46 GMT)
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