Mexico Tariff Plan Dropped: ETF Areas To Win
Zacks Investment Research | Jun 10, 2019 01:00AM ET
In late-May, President Donald Trump announced tariffs on all goods imported from Mexico in order to curb illegal immigration only to suspend his plans of a 5% tariff on Mexican goods “indefinitely” on late Friday. The announcement of a rollback in tariffs came after Mexico agreed to strengthen immigration enforcement . Global stocks should be the beneficiaries of this pact.
Against this backdrop, we highlight some ETF investing areas that could see at least a short-term bounce.
Mexico
Mexico has always been considered a Trump-unfriendly investment since the President’s campaign days. Mexican peso nosedived to an all-time low after Trump's victory in the U.S. presidential election in November 2016.
“Mexico is America’s third-largest trade partner, with $346.5 billion in goods imported from Mexico in 2018, according to the U.S. Trade Representative,” How Bad Are Trump Tariffs for Mexico ETFs? ).
Auto
Several auto companies have manufacturing hubs in Mexico. Companies like Ford Motors (NYSE:F) and General Motors (NYSE:GM) outsource their CARZ may see a nice of spell of gains.
Consumer
Be it China or Mexico, tariff war means higher costs for U.S. companies, which will likely be passed on to consumers. Per Bloomberg, Trump’s tariffs have already erased the $930 average tax cuts for average Americans. This is because Chinese and Mexican tariffs could have cost them XRT should gain.
Transportation
U.S. transportation stocks are highly dependen on Mexico. That is why the Dow transport index fell 2% just after Trump announced the Mexico tariff on May 31. Notably, rail operator Kansas City Southern (NYSE:KSU), derives a big chunk of its revenues from Mexico, IYT is up for gains following the incident. Apart from rail stocks, the fund also includes package delivery companies FedEx Corp (NYSE:F) and United Parcel Service (NYSE:UNP) and airlines stocks like United Continental Holdings (NASDAQ:UAL) .
Energy
Within the energy sector, Exxon Mobil (NYSE:XOM) Pain or Gain Ahead for Oil & Energy ETFs? ).
Corn
Since Mexico is one of the largest purchases of American corn, this soft commodity and Teucrium Corn ETF Top and Flop ETFs of May ).
Global Stocks
With tariffs threats taking backseat, clouds of uncertainty will disperse over the global stocks to some extent. All-world ETF iShares MSCI ACWI ETF QQQ should thus gain in the near term.
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