By Medha Singh
(Reuters) – Automakers and beer brewers, among most exposed to Mexico trade, regained lost ground on Monday after U.S. President Donald Trump said he would pause new tariffs on the country for one month.
The iShares of MSCI Mexico ETF reversed early losses to rise 2.3%.
Stocks were slammed in the first hour of trading amid a global risk-off mood after Trump slapped additional levies of 25% on imports from Mexico and most goods from Canada, as well as 10% on goods from China over the weekend, stoking worries that a trade war could cripple growth and corporate profits.
Executives on earnings calls have said Trump’s shifting plans for tariffs could disrupt world trade and prompt some companies to move production to the U.S.
Sectors with the largest Mexico exposure, auto and auto parts, accounted for $129 billion worth of imports in 2023 tumbled between 4.5% and 7.5% at the start of trading.
Following the announcement of the pause, Aptiv was down 3.7%, General Motors 1.6%, Ford 0.9% and Tesla 4.5%.
Beverages and spirits like tequila, mezcal and beer also make up a substantial portion of U.S. imports, totaling almost $12 billion in trade. Corona beer maker Constellation Brands was down 2.3%, after tumbling as much as 8.2%.
Uranium miners in U.S. and Canada fell, with Cameco Energy down 3.4%. Canada supplied 27% of uranium to U.S. utilities in 2023, according to data from the U.S. Energy Information Administration data.
“The ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs,” said Jay Timmons, CEO of the National Association of Manufacturers.
The small-cap Russell 2000 also clawed back lost ground. It was down 0.9 % after slumping nearly 2.3% earlier in the session. The index houses many companies without global operations that need foreign parts and will find it harder to offset the impact of the tariffs.
Trump acknowledged that tariff costs are sometimes passed along to consumers and said his plans might cause a short-term disruption. He also said something “very substantial” was planned for tariffs against the European Union.
Heavyweight Big Tech stocks also fell. Nvidia was down 2.7% and Amazon fell 0.7%.
HIGHER INFLATION, LOWER PROFITS
The tit-for-tat tariffs could eat into company profits, raise consumer prices and prompt the Federal Reserve to rethink its rate-cutting cycle that could upend the U.S. stock markets that are currently trading near record levels.
If the sweeping tariffs were sustained, Goldman Sachs estimated a reduction of 2%-3% in its S&P 500 earnings forecasts, although the brokerage believes the duties on Canada and Mexico are likely to be temporary.
“This weekend’s actions challenge our underlying view that the Trump administration will strive to limit disruptive policies as it balances its desire to reduce engagement with the world with a commitment to support US businesses,” Bruce Kasman, chief economist for J.P.Morgan, said.
“The risk is that the policy mix is tilting (perhaps unintentionally) into a business-unfriendly stance.”
Crypto stocks dropped, with exchange Coinbase down 2%, as investors’ flight to safety pushed bitcoin to a three-week low.
U.S.-listed shares of Chinese e-commerce firms declined, with PDD Holdings, parent of Temu, down 4.5%, while the Canadian counterpart declined 1.1%.
(Reporting by Medha Singh in Bengaluru, additional reporting by Shivansh Tiwary and Seher Dareen; Editing by Pooja Desai, Shinjini Ganguli and Sriraj Kalluvila)
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