When U.S. President Donald Trump on Thursday issued a new threat on his Twitter feed to slap tariffs of as much as 25 percent on goods from Mexico, he sent shockwaves through the markets which also hit beer makers. The Dow Jones industrial average fell 1.4 percent on Friday, with companies like Constellation Brands which depend on open borders to Mexico most hit. The shares of the importer of brands like Corona and Modelo to the U.S. dropped 5.79% on Friday in the wake of that news.
Bank experts noted that a 5% tariffs on Mexican goods would shave off nearly 4% from the company's overall bottom line. A 25% levy, meanwhile, would slash Constellation Brands' profit by 19%.
The tariffs are set to begin June 10 and would increase by 5 percentage points each month before reaching 25 percent on Oct. 1 if Mexico doesn’t take steps “to dramatically reduce or eliminate” the number of migrants, Trump said Thursday.
Imports of Mexican beer to the United States totaled USD 3.2 billion in 2017. Popular imported Mexican beer brands include Corona and Modelo by Constellation Brands,Dos Equis and Tecate by Heineken and Sol by MillerCoors. AB InBev, the U.S. beer market leader has a comparatively small business with Mexican beers in the U.S. In June 2013 AB InBev had to sell GrupoModelo’s U.S. distribution rights for Corona, Modelo and other Mexican beer brands in a USD 5.3 billion deal to gain U.S. antitrust approval of its USD 20.1 billion merger with Grupo Modelo.
Since exports to the U.S. make up about 30% of the Mexican economy, tariffs of up to 25 percent would most likely lead to a recession in Mexico which would in turn harm the U.S. economy and affect the whole world.