S&P Global Ratings believes the enforcement of a 25% tariff on all Mexican goods exported to the U.S. would have a significant impact on the Mexican economy, given about 83% of its total exports are destined for the U.S. Macroeconomic effects could include economic contraction, affecting consumption; a weaker peso-dollar exchange rate; and higher inflation.

Yet the impact on Mexican companies will vary depending on how long these tariffs would be enforced, how relevant or switchable their exports to the U.S. are, the substitution risk of these exports, and how the possibility of retaliatory tariffs from Mexico could play around, if applied.

Sectors With High Exposure To A Potential Tariff

In our opinion, the following industries are highly exposed to a 25% tariff.

Auto suppliers

Given the auto sector's substantial integration in North America, Mexican auto suppliers are highly exposed to a potential 25% tariff. While most exports from companies we rate are completed directly by the original equipment manufacturers (OEMs), which thus would carry the direct exposure to tariffs, we believe the tariff could elevate vehicle sales prices, which could in turn reduce volumes for the industry and affect profitability for most of the supply chain. In addition, Trump has mentioned in tariff remarks that the U.S. government could relocate some production facilities from Mexico to the U.S. 

However, the Mexican auto suppliers we rate benefit from their competitive positions, given the specialization of their products. For instance, they hold the largest market shares for their products in North America among the types of models they supply, which would give them some advantage when negotiating the pass-through of costs with OEMs.

Additionally, Mexico's competitive labor costs, skilled labor, and already installed capacity would provide economic incentives to maintain the current industry integration, since the required investments to transfer production to the U.S. would not be feasible in the short to medium term. 

Metals and mining

Rated Mexican mining companies have high exposure to the U.S. market because exports account for 10%-40% to the U.S. Thus, a potential 25% tariff would likely reduce demand for base metals like zinc, copper, and lead--as U.S. buyers seek alternative sources to avoid higher costs--and, to a lesser extent, precious metals such as gold and silver.

Lower volumes sold, coupled with potential higher costs as companies allocate products to likely less profitable markets, would directly affect companies' margins. However, we believe mining companies could negotiate more favorable conditions, given the scarcity of final mining products in the U.S. 

Oil

We believe the oil and gas sector would be highly exposed to the suggested tariff, since state-owned oil company Petroleos Mexicanos (Pemex; foreign currency: BBB/Stable/--;local currency: BBB+/Stable/--; national scale: mxAAA/Stable/mxA-1+) is a major supplier of crude oil to the U.S. The company exports around 25% of its total sales to the U.S.--474,000 barrels a day as of the third quarter of 2024.

However, refineries located at Costa Norte in the Gulf of Mexico use Mexican crude oil to run their operations. The supply of this crude is very limited--with Mexico and Venezuela as the main providers--thus providing some leeway for Pemex.

Sectors With Medium Exposure To A Potential Tariff

We think the following sectors would have medium exposure to a potential 25% tariff, given companies' exports to the U.S. represent 10%-30%.

Consumer products

The consumer products sector encompasses several subsectors, including consumer durable goods, alcoholic beverages, agribusinesses and commodity foods, and branded nondurable goods (food and beverages). While generalized tariffs on Mexico would hurt the overall consumer products sector, we believe exposure varies significantly across subsectors.

Moreover, we expect most companies to aim for price pass-through strategies in the event of tariffs enforcement, negotiating with trade partners or shifting production, when possible, to avoid the impact of tariffs. For the near term, we may see some oversupply until any potential tariffs are fully enforced. 

Consumer durable goods.   In our view, this industry would face a medium to high direct impact, given many companies export large parts of their production directly or within a more complex production chain through commercial partners to the U.S. We expect companies would undertake countermeasures by increasing prices, and therefore disrupting supply-demand dynamics for discretionary products if tariffs were enforced. The magnitude of the potential impact remains uncertain, because of the high integration of the supply chain (in production and labor force productivity) between Mexico and the U.S. 

Within this industry, we will continue to monitor closely Controladora Mabe S.A. de C.V. (BBB/Stable/--), a large Mexican manufacturer and distributor of home appliances, given its significant exposure to the U.S., which represents slightly more than 40% of its annual revenue and EBITDA.

Alcoholic beverages.  Producers in this industry with meaningful revenue from exported goods to the U.S., particularly companies that export products with denomination of origin labels, are also directly exposed to generalized tariffs. One such example is Becle S.A.B. de C.V. (BBB-/Stable/--), which generates close to 60% of its revenue in the U.S. and Canada, largely from exported tequila beverages.

While we would expect most companies in this industry to react to a tariff with pricing pass-through strategies, given the discretionary nature of these goods, we would also expect an impact on margins from lower volumes. Higher inflation in the U.S. could further depress demand. As a result, we would expect further shift away from premium sales, lower on-premise demand, and inventory destocking. However, potential depreciation of peso-dollar exchange rates may dilute cost overruns to some extent.

Agribusiness and commodity foods.  This sector accounts for about 5% of Mexico's exports to the U.S. We therefore expect the sector would face a medium to high impact from generalized trade tariffs. Yet some subsectors offering commodity-type products--such as sugar producers--could mitigate the impact by redirecting their exports to other international markets if the economics make more sense.

Nonetheless, this shift in trade policies would hit the sector's earnings and cash flows, given that part of their sales volume comes from exports to the U.S. market. 

Food and nonalcoholic beverages.  We expect this subsector would probably be less exposed than other consumer goods subsectors to a tariff, given the nondiscretionary nature of its products. Moreover, most Mexican companies we rate in this subsector that have exposure to the U.S. market are vertically integrated in that country. Products and raw materials exported to the U.S. from Mexico are limited in many cases.

We expect rated entities in this subsector to have more capacity to pass through inflation on input costs to final customers. Among the entities we rate, such as Grupo Bimbo S.A.B. de C.V. (BBB+/Stable/--), Sigma Alimentos S.A. de C.V. (BBB-/Watch Pos/--), Gruma S.A.B. de C.V. (BBB/Positive/--), and Arca Continental S.A.B. de C.V. (mxAAA/Stable/--), we would not expect a significant direct impact. However, macroeconomic side effects, including foreign exchange rate volatility, could pressure financial performance. 

Industrial real estate

We think real estate companies with exposure to industrial properties could face a negative medium-term impact. This is particularly true for industrial portfolios that have export-oriented tenants. If we see weaker trade activity between Mexico and the U.S. over the long run and tenants are unable to access new markets, this could reduce demand for industrial space, affecting occupancy and renewal rates. Yet the speed of the potential impact is difficult to predict due to:

• The lengths of existing leasing agreements (usually three- to seven-year contracts);
• The high costs for tenants to move their operations elsewhere; and
• Mexico's fundamental strengths, such as its geographic proximity to the U.S. and competitive labor force, considering also a potentially weaker peso.

Transportation

A potential 25% tariff could have a medium and indirect impact for Mexico's transportation industry. Of the products transported by rated companies (Ferrocarril Mexicano, S.A de C.V [mxAAA/Stable/mxA-1+] and GMexico Transportes S.A.B. de C.V. [mxAAA/Stable/--]), 20% are destined for export to the U.S. These companies' production and transported volumes could experience an indirect impact from a decrease in demand for transported goods, such as vehicles, cement, chemicals, fertilizers, and agriculture products.

Despite possible disruptions to supply chains, we believe rated companies could mitigate the tariff impact with diversified portfolios of clients and the current average five-year tenor of customer agreements, leading to an established minimum volume consumption.

Sectors With Low Exposure To A Potential Tariff

Finally, we believe the following sectors would have low exposure to a potential tariff, due to their concentration in the local market or because their total exports to the U.S. market are less than 10%. 

Building materials

Most building materials are produced and sold locally. Thus, we think the consequences of direct upward tariffs would have a relatively low to medium impact in the building materials sector. A relatively small portion of volumes produced in Mexico, if any, are oriented to exports, given companies tend to be vertically integrated in the countries where they operate. Yet broader macroeconomic effects from disruptive trade policies could eventually affect the sector.  

Homebuilders

Given the local nature of the homebuilder industry, the sector is not directly exposed to a potential 25% tariff, but secondary effects on Mexico's macroeconomic conditions could delay homebuyers' investment decisions and hit the sector's overall growth prospects. If Mexico's economic conditions significantly deteriorate, then we would expect homebuilders to approach land acquisition more cautiously, and housing starts would likely fall further from the already low 128,147 units produced in 2024, according to the Registro Único de Vivienda. A weaker peso could also increase building material costs and affect profit margins.

Retail

Given the local nature of this industry, the Mexican retail sector has no direct exposure to the U.S. market in terms of exports or significant operations in that country. Mexican retailers operate locally through physical stores and e-commerce platforms. Thus, we believe a tariff would not directly affect them.

However, several retailers--especially department stores--could face pressure from a weaker peso, given that a significant share of their inventory (20%-50%) is usually imported and denominated in U.S. dollars. Moreover, we view retailers' pass-through capacity from higher inventory costs as relatively limited, given the discretionary nature of their products.

On the other hand, convenience stores and food retailers should be less exposed because their U.S. dollar-denominated inventory is significantly lower and their products are less discretional.

Petrochemicals

Rated Mexican petrochemical companies mainly export polyethylene terephthalate (PET) and other plastic components for food and beverage containers production to the U.S., as well as final products for the telecom, construction, technology, agriculture, and auto industries. We believe a 25% tariff would have a low impact on these companies, given only 10% of total volumes are exported.

Rated petrochemical companies already have operating plants in the U.S. and, therefore, serve U.S. markets from local facilities. Moreover, competitive prices and transportation costs due to proximity to the U.S. market, as well as market growth prospects, would provide economic incentives for U.S. customers to maintain business relationships.   

Telecom

The Mexican telecom industry is concentrated locally. Only the largest issuers have operations abroad, but there are no direct exports to the U.S., and we therefore wouldn't expect an immediate impact from the 25% potential tariff.

However, if macroeconomic conditions in Mexico were to deteriorate as a result of prolonged trade disruptions, it could affect customers' purchasing power and thus the growth of revenue per user. Other potential indirect effects could include a delay of the expected investments stemming from nearshoring and the relocation of production facilities in Mexico. The latter could reduce the need for telecom services in industrial parks through lower growth in the industrial segment.  

Related Research

• Which Sectors Would Be Most Vulnerable To U.S. Tariffs On Canada And Mexico?, Jan. 30, 2025