Constellation Brands shares fall as Trump’s tariff plan threatens to make the Modelo and Corona more expensive

Shares of Constellation Brands It fell 3.5 percent on Tuesday after the president was elected. Donald Trump announced plans to have a 25% tariff on Mexican imports Once it was inaugurated.

Constellation imports all of its beers from Mexico, including Modelo and Corona. Beer accounted for 86% of Constellation’s sales in the first half of its fiscal year.

Bridge shares have fallen more than 3% this year, including Tuesday’s move. The brewer has a market cap of about $42 billion.

If enacted, Trump’s proposed tariffs would increase the cost of goods sold by Constellation Brands by about 16 percent, according to a research note by Wells Fargo Securities analyst Chris Carey published Tuesday.

To offset the tariffs, Constellation will likely raise prices. The brewer has some pricing power, even with inflation-stressed consumers. Last year, Modelo Special overtook Bud Light as the best-selling beer in the US.

It is unlikely that Constellation will move its beer production out of Mexico. Thanks for one Antitrust Settlement between the Anheuser-Busch InBevGrupo Modelo and the Department of Justice In 2013, AB InBev had to sell Modelo’s US business to Constellation. The deal requires Constellation to produce beer brands where AB InBev makes them, according to a research note from Roth MKM analyst Bill Kirk.

In recent years, Constellation has spent billions of dollars to expand its Mexican production capacity.

It is unclear whether Trump will actually implement his planned tariffs. In his previous term, he proposed a 5% tariff on Mexican imports, with plans to raise taxes to 25%, but these tariffs were not implemented.

In 2020, Trump signed a new trade agreement with Mexico and Canada.

In the Monday Night Post on its social media platform Truth SocialTrump also threatened to impose an additional 10% tariff on goods from China and a 25% tariff on Canadian imports.

Shares of carmakersThat includes General Motors and Stellenbosch, which were trading lower on Tuesday on tariff concerns.