President Trump’s plan to impose tariffs on Mexican imports is set to ding earnings of S&P 500 companies, according to Goldman Sachs.
The 5% tariff on imports from Mexico, is set to take effect on June 10, per a tweet from President Trump last week. That could drop S&P earnings per share by 1%.
Trump plans to issue the tariffs because he says Mexico isn’t doing enough to stop migrants from illegally entering the United States. The Trump administration also outlined scenarios in which the tariff on Mexico imports would be raised: 10% on July 1, 15% by August 1, 20% by September 1 and 25% by October 1. It’s unclear what specific catalysts would trigger a raise in the tariffs at these dates.
“We estimate that each incremental 5% tariff on all imports from Mexico could lower S&P 500 EPS by approximately 1%, or slightly less than $2, if companies absorb the entire increase in input costs,” said Goldman strategist Ben Snider in a note to clients.
The aftermath of last Thursday’s tariff tweet from President Trump has been rough for the stock market, with the S&P 500 (^GSPC) falling 1.3% on Friday alone. That brought the S&P 500’s loss for the month of May to almost 7%, as Trump also threatened to raise tariffs on China in a May 5 tweet that rattled markets.
For Mexico, Goldman highlights a few Russell 1000 stocks with exposure to Mexico, including Skyworks Solutions (SWKS), with 39% of assets in Mexico, Lear Corporation (LEA), with 24% of assets in Mexico and even Pepsico (PEP), with 3% of assets in Mexico.
Goldman also sees the Mexico tariffs affecting restaurants stocks, although it notes how resilient these stocks have been amid the latest escalation of trade tensions.
“Mexico represents the largest source of U.S. agriculture imports, adding direct risk to restaurants should the import tariffs be implemented. In addition, the broad impact of incremental import tariffs on the U.S. consumer should affect spending on dining as well as goods like consumer electronics,” the analysts said.
Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.
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