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Constellation Brands’ stock drops as new tariffs could raise Corona, Modelo import costs

Constellation Brands' stock drops as new tariffs could raise Corona, Modelo import costs

FINANCE NEWS

Constellation Brands’ stock drops as new tariffs could raise Corona, Modelo import costs


A case of Constellation Brands Inc. Corona beer sits on a shelf in a cooler during a delivery in Ottawa, Illinois, U.S., on Tuesday, April 2, 2019.

Daniel Acker| Bloomberg | Getty Images

Shares of Constellation Brands dropped 5.8% Friday on the back of President Donald Trump’s threat to slap tariffs on all Mexican imports.

The drop was the biggest one-day loss since Jan. 9 for the maker of Mexican beers like Corona and Modelo.

On Thursday night, Trump tweeted will impose a 5% tariff on all goods coming from Mexico starting June 10 “until such time as illegal migrants coming through Mexico, and into our Country, STOP.”

The White House then said in a statement that levies on Mexican imports would increase up to 25% if immigration issues along the U.S.-Mexico border persisted. Mexico President Andres Manuel Lopez Obrador responded to the threat in a letter to Trump, saying: “Social problems cannot be resolved with taxes or coercive measures.”

Tariffs on Mexican goods would dent Constellation Brands’ stock and bottom line. According to Morgan Stanley, about 75% of its beer portfolio is “entirely imported” from Mexico. The bank also notes that a 5% tariffs on Mexican goods would shave off nearly 4% from the company’s overall bottom line. A 25% levy, meanwhile, would slash Constellation Brands’ profit by 19%.

BMO Capital Markets notes the impact could be bigger. An analyst at the bank estimates Constellation Brands imports 95%-to-98% of its beer from Mexico.

—CNBC’s Frank Holland contributed to this report.

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