Citibank expects sales costs for Zodiak Brands (STZ.US) to rise as a result of the Mexican tariffs
1min read Zhitong Finance APP noticed that on Tuesday, the stock of STZ.US, the brand of Constellation Brands, fell 3.5% after President-elect Trump announced that he would impose a 25% tariff on goods imported from Mexico once he takes office.
All of Constellation's beers are imported from Mexico, including Modelo and Corona. Beer accounted for 86% of the company's sales in the first half of this year.
Since the beginning of this year, the stock of the beer maker has fallen more than 3% including Tuesday's decline. The company is valued at about $42bn.
A study published by Chris Carey, analyst at Wells Fargo Securities on Tuesday showed that if Trump's proposed tariffs were implemented, Constellation's sales costs would rise by about 16%.
Constellation may raise prices to offset the tariffs. Even if consumers are tired of inflation, the beer maker has some pricing power. Last year, Modelo Especial replaced Bud Light as the most popular beer in the US.
Constellation is unlikely to move its beer production out of Mexico. In 2013, AB InBev was forced to sell Modelo's US business to Constellation after it reached an antitrust settlement with Modelo and the US Department of Justice.
The agreement required Constellation to produce AB InBev's beer brands, according to a study by Roth MKM analyst Bill Kirk.
Constellation has spent billions of dollars in recent years to expand its production capacity in Mexico.
It is unclear whether Trump will actually implement his tariff plan. During his previous term, he proposed a 5% tariff on Mexican imports and planned to raise it to 25%, but the tariffs were not implemented.
Trump signed a new trade agreement with Mexico and Canada in 2020, which became law.
Trump also threatened on Monday night on his social media platform Truth social to impose an additional 10% tariff on goods from China and a 25% tariff on Canadian imports.
Shares of automakers including General Motors and Stellantis also fell on Tuesday due to concerns about tariffs.