Mexico tariff suspension
Kansas City Southern (KSU) shares gained more than 2% on June 10. Late on June 7, President Trump suspended the planned tariffs on Mexican goods. The two countries reached an agreement to curb illegal migration into the US.
Late on May 30, President Trump threatened to levy a 5% tariff on all of the goods imported from Mexico. The levy would take effect on June 10 if the country didn’t control illegal migration. The next day, Kansas City Southern stock fell 4.5% due to concerns that more expensive imports would disrupt trade between the two nations and impact US railroad companies’ rail traffic volumes.
Kansas City Southern has the highest Mexico exposure among Class I railroad companies. Nearly 40% of the company’s total rail traffic is generated through cross-border trades. About 60% of Kansas City Southern’s cross-border rail traffic is between the US and Mexico. So, ~25% of Kansas City Southern’s rail traffic is exposed to the Mexico tariff risk.
Among the Class I US railroad companies, Kansas City Southern has significant exposure to the latest Mexico tariff hike risk. About 40% of the company’s total rail traffic was generated through cross-border trades.
Auto sector gained the most
US automakers benefited from the tariff suspension on Mexican goods. Vehicles and parts contribute ~30% of the total imports from Mexico. General Motors (GM), Fiat Chrysler (FCAU), and Ford Motor (F) shares gained 1.5%, 1.7%, and 0.6%, respectively, on June 10. The First Trust NASDAQ Global Auto Index Fund (CARZ) gained 1.3%. CARZ outperformed major US indexes’ gains. The Dow Jones, the NASDAQ, and the S&P 500 gained 0.3%, 1.1%, and 0.5%, respectively, during intraday trade.