The imposition of 25% tariffs on Canada and Mexico by U.S. President Donald Trump caught investors off guard. Although they have been paused for 30 days, still, the size of these tariffs keeps the risk hanging over the market. Meanwhile, the 10% tariff on Chinese imports has been implemented. Shares of companies across the auto, retail, and beverage sectors with international supply chains were hit particularly hard by the U.S. tariffs. These industries are grappling with uncertainty, resulting in significant stock declines.
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How Do Tariffs Impact Companies?
A tariff is a tax on imports, paid by the importer, not the exporter. If the Trump administration imposes a 25% tariff on goods from Canada and Mexico, U.S. companies will bear the cost, making domestic products more attractive. Meanwhile, U.S. businesses must decide whether to raise prices or absorb the tariff cost, either of which could hurt profitability and impact their stock price.
Auto Stocks Struggle Amid Tariff Threats
The tariffs could significantly affect the global automotive industry, which heavily depends on manufacturing operations throughout North America. According to S&P, Canada and Mexico collectively produce around 5.3 million light vehicles each year, with about 70% of them being shipped to the U.S.
Bernstein warned that the new tariffs on Mexico and Canada could significantly hurt the free cash flow (FCF) of major U.S. automakers, with General Motors (GM) facing the biggest impact. The firm estimates that a 25% tariff could slash GM’s 2026 FCF by 64%, Ford’s (F) by 39%, and Stellantis’ (STLA) by 38% in a worst-case scenario.
Tariff Impact Reaches Food and Retail Sectors
Next up are food and beverage stocks that are also at risk if the tariffs go through. Constellation Brands (STZ), a major importer of alcohol from Mexico, has dropped more than 6% in the past five days due to the tariff uncertainty, hitting its lowest point in over four years. Meanwhile, restaurant chain Chipotle Mexican Grill (CMG) and avocado supplier Calavo Growers (CVGW) could face higher costs due to tariffs on Mexican imports, particularly affecting their avocado supplies.
Not to forget the retailers like Nike (NKE) and Lululemon (LULU), which could be at risk from Trump’s tariffs due to their significant dependence on Chinese imports, such as fabrics. Additionally, their large presence in China may be impacted by the negative sentiment surrounding the trade war.
Here are some of the stocks affected by U.S. tariffs.
