The surprise announcement by President Donald Trump of an escalating tariff regime against Mexico sent ripples through almost every economic sector in the U.S., hammering American companies that sell automobiles or run railroads, grow vegetables or build power infrastructure.
Trump tweeted late Thursday that he is slapping a 5% tariff on all Mexican imports, effective June 10, and will raise those tariffs to 25%, until the Illegal Immigration problem is remedied.
Whether its avocadoes 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 felt it immediately Friday.
Shares of General Motors Co., which imports more vehicles into the U.S. than any other automaker, slid 4% at the opening bell. European and Asian automakers ship cars across the border to the massive U.S. market as well. Fiat Chrysler and Nissan Motor Co. both tumbled more than 5%
For GM, we roughly estimate that a 5% tariff could be a several-hundred-million dollar annual earnings hit, said Itay Michaeli of Citi Investment Research.
That potential damage rippled outward to auto suppliers. American Axle & Manufacturing Inc. slid 4%.
All of the 11 sectors in the S&P 500 were getting hit Friday, save for utilities because there is no or little cross boarder traffic in that sector. Many investors trying to get out of the way off falling shares put money there, or in treasury bonds.
Companies in the consumer staples sector, sellers of food and groceries, were under significant pressure. Cysco Corp., Costco and Kroger, the nations biggest grocery chain, all slid.
Constellation Brands, an American company that sells Corona and a bunch of other Mexican beers, plunged 7 percent. Molson Coors, which also makes Miller High Life and Leinenkugel, fell as well.
Chipotle Mexican Grill Inc., which advertises its food as the freshest, slipped 2 percent.
The companies that transport goods across the country, especially across the border were punished, too.
Kansas City Southern operates a commercial corridor of the Mexican railroad system and owns a track between Mexico City and Laredo, Texas. It gets almost half its revenue from Mexico each year. Its shares are plunged 7%. All major railroads fell, as did every major airline and tanker company.
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 nations 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.
