By Medha Singh
(Reuters) - Automakers and alcoholic beverage companies pared early session losses on Monday after U.S. President Donald Trump paused new tariffs on Mexico for one month.
Trump reached a deal with Mexican President Claudia Sheinbaum requiring Mexico to reinforce its northern border with 10,000 National Guard members to stem the flow of illegal drugs. The agreement also includes a U.S. commitment to work to prevent trafficking of high-powered weapons to Mexico.
The iShares of MSCI Mexico ETF reversed early losses to rise 2.5%.
Stocks lost ground in the first hour of trading amid a global risk-off mood after Trump said over the weekend he would slap additional levies of 25% on imports from Mexico and most Canadian goods, as well as 10% on goods from China, stoking worries that a trade war could cripple growth and corporate profits.
Executives on earnings calls have said Trump's shifting plans for tariffs could disrupt world trade and prompt some companies to move production to the U.S.
Sectors with the largest Mexico exposure, autos and auto parts, were particularly vulnerable, but pared earlier losses.
Aptiv (NYSE:APTV) shed 3.9%, General Motors (NYSE:GM) fell 3.4%, Ford (NYSE:F) lost 1.9% and Tesla (NASDAQ:TSLA) was down 5.7%.
Beverages and spirits such as tequila, mezcal and beer also make up a substantial portion of U.S. imports, totaling almost $12 billion in trade. Corona beer maker Constellation Brands (NYSE:STZ) was down 2.4%, after falling as much as 8.2%.
Canadian uranium miner Cameco (NYSE:CCJ) was down 2.8%. Canada supplied 27% of uranium to U.S. utilities in 2023, according to data from the U.S. Energy Information Administration.
"The ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs," said Jay Timmons, CEO of the National Association of Manufacturers.
The small-cap Russell 2000 was down 1.4%. The index comprises many local companies that often require foreign parts and may find it harder to offset the tariffs' impact.
Trump acknowledged that tariff costs are sometimes passed to consumers and said his plans might cause a short-term disruption. He said something "very substantial" was planned for tariffs against the European Union.
Goldman Sachs estimated a reduction of 2%-3% in its S&P 500 earnings forecasts if the sweeping tariffs were sustained, although the brokerage believes the duties on Canada and Mexico are likely to be temporary.
Crypto stocks dropped. Coinbase (NASDAQ:COIN) was down 3%, while bitcoin fell to a three-week low of $91,441.89. Bitcoin was last down 2.38% to $99,695.91.