Automakers lose $17 billion over Trump’s Mexico threat

Bloomberg

The automotive industry is bearing the brunt of trade-war crossfire again as US President Donald Trump threatens to slap tariffs of as much as 25 percent on goods from Mexico, a key production hub for carmakers from Mazda Motor Corp. to General Motors Co.
Mexico is the largest source of US vehicle and auto-parts imports, meaning tariffs would increase costs for virtually every major manufacturer. In late night tweets, Trump warned tariffs would start at 5 percent on June 10 and increase to 25 percent on October 1 unless Mexico stops immigrants from entering the US illegally.
The world’s largest automakers — including Ford Motor Co., Toyota Motor Corp. and Volkswagen AG — lost $17 billion in market value in trading. The Bloomberg World Auto Manufacturers Index slumped as much as 2.2 percent and ended the week at the lowest since July 2016. “Tariffs will mean higher price tags on cars for sales in US and that will hit sales,” said Seiichi Miura, an analyst at Mitsubishi UFJ Morgan Stanley. “While the impact will differ for each carmaker, all of them have moved into Mexico.”
GM, Ford and Fiat Chrysler Automobiles NV shares all plunged at least 4 percent intraday in New York trading. Critical models imported from Mexico include GM’s Chevrolet Silverado and GMC Sierra and Fiat Chrysler’s Ram full-size pickups — the industry’s most profitable vehicles; Toyota’s Tacoma mid-size trucks; and sedans including Nissan Motor Co.’s Versa and Sentra, Volkswagen’s Jetta and the Mazda3.
A 25 percent tariff would be worth $86.6 billion annually, which “could cripple the industry and cause major uncertainty,” Emmanuel Rosner, an auto analyst for Deutsche Bank, wrote in a report.
Japan’s Toyota and South Korea’s Kia Motors Corp declined more than their respective benchmark indexes. Shares of Mazda, which is particularly reliant on Mexico, fell to the lowest since 2013.
In Germany, BMW AG closed at the lowest since November 2012. The automaker is slated to open a plant in San Luis Potosi next week that will make 3-Series sedans for the US market starting later this year. Mercedes-Benz maker Daimler AG manufactures heavy trucks, buses and parts in Mexico.
Canada’s Magna International Inc., which has 32 facilities and more than 29,000 employees in Mexico, slumped as much as 5.8 percent in Toronto. Sweden’s Dometic Group AB, which manufactures climate-control systems for trucks and recreational vehicles, fell as much as 6.5 percent.
The company said in April it planned to build a second plant in Mexico, moving additional capacity there from China. Autoliv Inc., which has more than 14,000 employees in Mexico making steering wheels, seat belts and airbags, dropped as much as 7.8 percent in Stockholm.

Dell, HP in line of fire
Bloomberg

US President Donald Trump’s vow to impose tariffs on all goods made in Mexico will be a blow to major hardware technology companies already reeling from the US-China trade war.
Dell Technologies Inc., HP Inc. and Hewlett Packard Enterprise Co. are among the US technology companies that manufacture products in Mexico. Computers and printers made by these companies and imported into the US from Mexico would face
a 5 percent levy starting June 10, according to Trump’s decree.
The White House said that the tariffs would rise as high as 25 percent in October if Mexico doesn’t stop the flow of migrants and asylum-seekers across the US southern border.
The US imported $25 billion worth of computers from Mexico in 2018, according to the US Census Bureau, and $2.5 billion
in computer accessories. Hardware giants that have relied more on Mexican production the past two decades to take advantage of the North American Free Trade Agreement are now facing whiplash. They have already been forced to reconfigure their supply chains to contend with American duties imposed by Trump on products made in China.
For Dell, Mexico was a safe harbor to escape from the worst impacts of the US-China trade conflict. The Round Rock, Texas-based company reallocated some desktop computer production to Mexico from China months ago in response to US levies. The company also makes servers in Mexico. Now, it’s trying to figure out how to deal with the potential new tariffs.