Auto giants, nuclear firms bear the brunt as Trump tariffs roil markets

By Medha Singh

(Reuters) -Automakers, beer brewers and nuclear power companies led declines in a broad equity pullback on Monday after the U.S. hit Mexico, Canada and China with sweeping tariffs, stoking worries that an all-out trade war could cripple growth and corporate profits.

Investors sold stocks and bought dollars on Monday, as they assessed the risks of a trade war after Donald Trump imposed tariffs on top U.S. trading partners.

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.

The sectors most affected by new tariffs by far are auto and auto parts, which accounted for $129 billion worth of imports from Mexico in 2023. Aptiv slumped 8.9%, General Motors slid 5.2%, Ford dropped 3.3% and Tesla shed 4.7%.

Beverages and spirits like 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 tumbled 5.1%.

Uranium miners in U.S. and Canada fell, with Cameco Energy down 3.4%. Canada supplied 27% of uranium to U.S. utilities in 2023, according to data from the U.S. Energy Information Administration data.

Nuclear-energy power providers such as Vistra and Constellation Energy shed 3.1% and 2.5%, respectively.

"Beyond the rising cost of moving goods across borders, it will disrupt established supply-chains and depress North American business sentiment," Bruce Kasman, chief economist for J.P.Morgan, said in a note.

Still, smaller companies without global operations that need foreign parts will find it harder to offset the impact of the tariffs. The domestically focused small-cap Russell 2000 slumped 2.3%.

Trump acknowledged that tariff costs are sometimes passed along to consumers and said his plans might cause a short-term disruption. He also said something "very substantial" was planned for tariffs against the European Union.

Heavyweight Big Tech stocks also fell. Nvidia was down 5.3% and Amazon fell 2.2%.

HIGHER INFLATION, LOWER PROFITS

The tit-for-tat tariffs could eat into company profits, raise consumer prices and prompt the Federal Reserve to rethink its rate-cutting cycle that could upend the U.S. stock markets that are currently trading near record levels.

If the sweeping tariffs were sustained, Goldman Sachs estimated a reduction of 2%-3% in its S&P 500 earnings forecasts, although the brokerage believes the duties on Canada and Mexico are likely to be temporary.

"This weekend's actions challenge our underlying view that the Trump administration will strive to limit disruptive policies as it balances its desire to reduce engagement with the world with a commitment to support US businesses," Kasman said.