Barclays (LON:BARC) analysts on near-total visibility into commodities crossing U.S. borders, said Mexico’s growing prominence as the U.S.’s largest trading partner raises concerns about the impact of potential import duties.
The 2019 U.S.-China trade war serves as a reference for possible challenges.
Analysts note declines in domestic rail and trucking volumes, as well as contractions in global freight markets, during that period. While tariffs could disrupt trade with Canada and Mexico, trade among North American partners expanded under the prior U.S.-Mexico-Canada Agreement.
Tariff escalation with China would likely hit global freight providers and Western railroads hardest, particularly those reliant on grain exports. Broader actions affecting Europe or North America could disrupt ground-based transportation sectors like trucking and railroads.
Consumer goods remain a focal point. Electronics, accounting for one-third of U.S. consumer goods imports, are primarily sourced from China and Mexico. Apparel and footwear imports have shifted significantly from China to Southeast Asia in recent years. Companies like Ralph Lauren (NYSE:RL) have reduced reliance on China, with sourcing dropping to single digits as of late 2024.
Industrials also face risks. Sectors heavily reliant on imports from Mexico, China, and Canada include automotive components, HVAC equipment, and power tools. Companies like Stanley Black & Decker (NYSE:SWK) and Rockwell Automation (NYSE:ROK) may see pricing pressures, while net exporters like Honeywell (NASDAQ:HON) and 3M could fare better.
European logistics companies, too, have exposure to trans-Atlantic and trans-Pacific trade lanes. Potential disruptions, such as port strikes, could amplify challenges for global supply chains.
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