The wide world of trade wars just got a bit more hostile. After tariffs have been imposed on inbound goods coming from China into the United States, Thursday night’s news was given a new direction after President Trump announced a 5% introductory tariff against goods coming into the United States from Mexico. This new tariff on Mexico is also set to ratchet up to 25% in 5% monthly increments, if Mexico does not make an effort to stop the flow of illegal immigrants into the United States.
With Mexico now in the mix, some companies are taking it on the chin far worse than others. 24/7 Wall St. has identified 8 serious losers that are reacting worse than their peers based on their would-be exposure to Mexico. The top exchange-traded fund (ETF) for Mexico also reacted far worse than the Dow, NASDAQ, and S&P 500.
Please Note: This article has been updated to reflect Friday’s closing prices, and a note has been added to show relative trading volume. We have also added in some industry and economist views about what the impact the tariffs against Mexico might have on the markets or the economy. Tariff uncertainty also appears to be a gift for gold investors.
The financial markets saw a midday drop in the Dow Jones Industrial Average with a loss of around 265 points (1.05%) and the decline in the S&P 500 at almost 29 points (1.05% as well). Update for Close: The Dow closed down about 355 points at 24,815.84 and the S&P 500 closed down 36.80 at 2,752.05. West Texas Intermediate crude was lower, down $1.75 to $54.84 per barrel in midday trading but it closed down $3.24 (-5.5%) at $53.35 per barrel. Where strength was found was in bonds, with the price going up pushing the yields lower (updated for close): the 10-year Treasury note was down by more than 8 basis points to a yield of 2.14%, and the 30-year Treasury yield was down 7 basis points to 2.58%.
Citigroup Inc. (NYSE: C) is a major market player in Mexico and Latin America, with more of a major international focus than most U.S. banks. Citi’s 2018 annual report talked about a growing share in Mexico in its global consumer bank efforts, and the three main strategic markets are listed as the U.S., Mexico and Asia. Citi even calls itself one of Mexico’s premier financial institutions with top brand recognition and a vast retail banking network. Its shares were down by about 2% at $62.50 in midday trading on Friday, and down from a 52-week high of $75.24.
Update for Close: Citi shares closed down 2.3% at $62.15 on 15.9 million shares (10% above average volume).
Constellation Brands Inc. (NYSE: STZ) took it on the chin due to its exposure to Mexican beers. The company’s beer brands include the various Corona labels, as well as Modelo and Pacifico. Shares saw a $12 price drop (6.4%) to $175.30 in midday trading, in a 52-week range of $150.37 to $234.26.
Update for Close: Shares of Constellation Brands closed down 5.8% at $176.45 on 6,15 million shares (about 3.5-times average daily volume).
Delphi Technologies PLC (NYSE: DLPH) faces the double whammy when it comes to tariffs. Its 2018 annual report states: “The majority of our manufacturing and distribution facilities are in countries outside of the U.S., including Mexico, China …” Its shares were down almost 6% at $15.50, in a 52-week range of $13.18 to $53.78.
Update for Close: Shares of Delphi Technologies closed down 7.3% at $15.26 on 2.28 million shares (75% above average volume).
Kansas City Southern (NYSE: KSU) is a major rail player that brings goods from Mexico into its rail hubs in the United States. While it is one of 7 Class-1 railroads in the U.S., Kansas City Southern de México, S.A. de C.V. is one of two large regional railroads in Mexico and KCS also owns 50% of the Panama Canal Railway Company in Panama. The 2018 annual report shows that its combined North American rail network is roughly 6,700 route miles linking commercial and industrial markets in the United States and Mexico. Its shares were down 5.5% at $112.25. That is down about 11% from its 52-week high of $112.95 as well.
Update for Close: Kansas City Southern’s shares closed down 5.54% at $113.28 on 2.83 million shares (175% higher than its average volume).
Rockwell Automation Inc. (NYSE: ROK) does business in 80 countries, according to its annual report. Its 2018 annual report shows that, outside of the United States, on a country-of-destination basis its top markets are China, Canada, Mexico, Italy, the United Kingdom, Germany and Brazil. Its largest square footage of manufacturing space (at 630,000) was listed as being in Monterrey, Mexico. Shares were down 4.2% at $148.75, with a $17.6 billion market cap. The 52-week trading range is $141.46 to $198.23, and shares were last seen down 25% from its 52-week high.
Update for Close: Rockwell Automation shares closed down 3.15% at $90.40 on 10.05 million shares (only about 75% of an average day’s trading volume).
Southwest Airlines Co. (NYSE: LUV) recently expanded into Mexico and the Caribbean after years and years of having only domestic flights. The airline is one we have flagged as a would-be winner with zero flights over China, but tensions rising with Mexico may bite further into the airline than in years past, at the same time it deals with the 737 MAX groundings. With more than 4,000 flights per day during peak travel seasons, the airline flies passengers and cargo into and out of multiple cities in Mexico. Southwest Airlines was last seen down 2.3% at $48.26 a share, in a 52-week range of $44.28 to $64.02. That is down 25% from its high.
Update for Close: Southwest Airlines’ shares closed down 3.6% at $47.60 on 5.05 million shares (15% above average volume).