Modelo Especial beer cans are displayed for sale at a grocery store on June 14, 2023 in Los Angeles, California.
Mario Tama | Getty Images
shares Constellation brands The US stock index fell 3.5% on Tuesday after President-elect Donald Trump announced plans to impose 25% tariffs on Mexican imports once he is 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.
Constellation shares have fallen more than 3% this year, including Tuesday's move. The beer company's market cap is about $42 billion.
If implemented, Trump's proposed tariffs would raise Constellation Brands' cost of goods sold by about 16%, according to a research note from 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-weary consumers. Last year, Modelo Especial overtook Bud Light as the best-selling beer in the United States
Constellation is unlikely to move its beer production outside of Mexico. Thanks to the antitrust settlement between Anheuser-Busch InBevGrupo Modelo and the Department of Justice In 2013, AB InBev was forced to sell Modelo's American business to Constellation. That agreement requires Constellation to produce beer brands made by AB InBev, according to a research note from Roth MKM analyst Bill Kirk.
In recent years, Constellation has spent billions of dollars expanding its production capacity in Mexico.
It is unclear whether Trump will actually enact the planned tariffs. In his previous term, he proposed imposing a 5% tariff on Mexican imports, with plans to escalate duties to 25%, but these tariffs were not implemented.
In 2020, Trump signed a new trade agreement with Mexico and Canada into law.
In a Monday night post on his social media platform Truth Social, Trump also threatened to implement an additional 10% tariff on goods coming from China and a 25% tax on Canadian imports.
Shares of automakers, including General Motors and Stellantis, also traded lower on Tuesday on tariff concerns.
