The surprise imposition by President Donald Trump of an escalating tariff regime against Mexico sent ripples through almost every economic sector in the U.S. Friday, hammering American companies that sell automobiles or run railroads, grow vegetables or create medical devices.
Trump vowed to slap a 5 percent tariff on all Mexican imports on June 10, just over a week away, and raise those tariffs to 25 percent by October, “until the Illegal Immigration problem is remedied,” as he said on Twitter.
Whether it’s avocados on a taco or a new Chevrolet Blazer SUV in the driveway, if the tariffs go into effect, Americans could feel it.
The companies that produce such goods and must choose whether to absorb those costs or pass them on to customers felt it immediately Friday.
Shares of General Motors Co., which imports more vehicles into the U.S. than any other automaker, slid 4 percent at the opening bell. European and Asian automakers ship cars across the southern border to the massive U.S. market as well. BMW is opening a $1 billion plant in Central Mexico this year. Shares of Fiat Chrysler and Nissan Motor Co., both with sizeable Mexican operations, tumbled more than 5 percent.
“For GM, we roughly estimate that a 5 percent tariff could be a several hundred million-dollar annual earnings hit,” said Itay Michaeli of Citi Investment Research.
The auto industry has spawned dozens of other industry that supply it with billions in goods each year. Those companies were also getting hammered Friday. Autoliv and Visteon slid 5 percent. American Axle & Manufacturing Inc. fell 4 percent.
All of the 11 sectors in the S&P 500 were getting hit Friday, save for utilities and real estate because there is no or little cross-border traffic in those sectors. Many investors trying to get out of the way of falling shares put money there, or in treasury bonds.
Retailers, already reeling from an escalating trade dispute with China, recoiled at what is becoming a multifront trade war.
The consumer discretionary sector, mostly retailers, was the biggest decliner Friday.
Kohl’s, Macy’s, Nordstrom and Dillard’s hit 52-week lows. So did Gap, Guess and Urban Outfitters. Companies that sell food and groceries, including Kroger, the country’s largest grocery store, retreated.
Companies that transport goods across the country, especially across the border, also were punished.
“This is opening up a trade war in a new direction that had not been on the radar screen for most people, ” said David French, senior vice president of government relations at the National Retail Federation, the nation’s largest retail trade group. “This could be very disruptive and costly.”
The most prominent mindset seemed to be bafflement, with industry groups again warning of price hikes for everyone.
“Threatening tariffs on Mexican imports while simultaneously seeking support in Congress for a trade deal aimed at keeping trade barriers low with Mexico is a confusing and counterproductive strategy,” said Hun Quach, vice president of international trade at the Retail Industry Leaders Association. “Whether the rhetorical target is Mexico or China, the bill is adding up for American consumers who will pay the price for these tariffs.”