US Auto to Lose the Most if US-Mexico Trade War Materializes

June 6, 2019 Share Print 0

Automotive companies have the most to lose if the U.S. imposes tariffs on Mexican goods, with consumer staples, materials, and energy companies trailing closely behind, RBC Capital Markets said in a note Thursday.

With over $100 billion of autos and auto parts imported into the U.S. from Mexico, General Motors, Ford, American Axel, Autoliv and Lear are the stocks most at risk, RBC head of U.S. equity strategy Lori Calvasina said in the note.

Last month, President Donald Trump announced the United States will impose a 5% tariff on all Mexican imports starting on June 10 unless Mexican government does more to stop illegal migrants from entering the U.S. The tariffs, if enacted, will go up incrementally to 25% by October.

While RBC acknowledged China tariffs pose a greater risk to U.S. companies than tariffs on Mexico, the firm examined which sectors in the U.S. equity market are most at risk in an escalated trade war with Mexico.

“The new Mexico tariffs could be devastating to the entire auto value chain,” Calvasina said.

Companies like Advanced Auto Parts, Autozone, and O’reilly Autoparts have scores reflecting “negative” impact because they will likely have to pass price increases onto the consumer, the note said.

via CNBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.