S&P Global reveals stocks hit hardest by tariffs

The stock market fell 1.7% on Monday after President Trump revealed tariffs on imports from China, Canada, and Mexico would kick in at midnight. 

The news dashed hopes for a last-minute reprieve to prevent tariffs from increasing the cost of products brought in from these countries. The resulting worry is that absent a reversal of policy, corporate profits could take a hit as companies struggle to pass on higher costs to already cash-strapped consumers.

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Industries are exposed to higher costs because the tariffs are far-ranging. 

Most American automakers produce cars in Mexico and Canada. Much of our lumber comes from Canada, and much of our produce makes its way north from Mexico. Meanwhile, China remains a huge source of low-cost products like apparel and appliances.

The tariff news will likely hit individual companies differently, though. Some are better insulated, with more pricing power. In short, some companies will be hit harder by tariffs than others.

Imports from Canada, Mexico, and China are about to get more expensive, creating a headwind for related stocks.

PATRICK T. FALLON/Getty Images

Consumers are already feeling the pinch

S&P Global is a major research company. It may be best known for its role in managing the constituents of the S&P 500, but it does a lot more than that. 

For example, it’s one of the big three credit-rating companies, alongside Moody’s and Fitch.

Its role in evaluating the creditworthiness of major companies puts it in a great position to evaluate the possible negative impacts of tariffs across industries, including consumer and retail companies.

Related: Walmart, rivals may face growing problem

Those companies are already facing a slate of headwinds. Inflation has retreated from its breakneck pace in 2022, but prices continue to climb, and recently inflation has ticked higher. 

In January, the Consumer Price Index showed prices rose 3% from one year ago, up from a cycle low of 2.4% in September. 

With inflation rising again, cost-conscious consumers remain gun shy about making discretionary purchases, something that is already posing challenges for major retailers ranging from Walmart  (WMT)  to Big Lots  (BIG) .

It also doesn’t help that in addition to higher costs, consumers feel more antsy about their jobs. Last week, 242,000 U.S. workers filed for unemployment, up from 203,000 in early January. 

Perhaps, unsurprisingly, consumer sentiment has soured. 

The Conference Board’s Consumer Confidence survey results for February were concerning.

“At the headline level, the reading for consumer confidence dropped to 98.3 in February from 104.1 for January and well below the more than 102 that economists were looking for,” Stephen Guilfoyle wrote in a post on TheStreet Pro.

The Conference Board’s data “was the steepest one-month drop for this series since August of 2021,” said Guilfoyle, a veteran trader and economist. 

Companies most exposed to tariffs

S&P Global recently released a report highlighting exposure to tariffs within the consumer goods, retail and restaurant industries.

“Broad-based tariffs could hurt more U.S. consumer products and retail companies this time around than in 2018,” analysts wrote. “Price increases will be harder to pass along to the consumer this time around because of the recent inflation cycle and already weak consumer environment.”

Those importing alcohol, toys, apparel, and retailers are among those hardest hit by 25% tariffs on Canada and Mexico and 20% tariffs on China products.

Related: U.S. consumers are wilting under renewed stagflation risks

Constellation Brands  (STZ) , for example, is one of the most heavily exposed to tariff risk because it generates significant sales from imports of Corona beer from Mexico.

“More than 75% of its sales are U.S. beer sales from Mexican imports,” said S&P Global.

Mattel  (MAT)  and Hasbro  (HAS)  face big challenges because toys are made inexpensively overseas, with much of the production in China. Mattel and Hasbro source about 50% and 40% of their toys from China, respectively.

A lot of clothing originates overseas, too. Companies have worked to shift production out of China following the first round of tariffs in 2018, but companies like Kontoor  (KTB) , the company behind Wrangler jeans, are still exposed. Roughly one-third of Kontoor’s products come out of Mexico, said S&P Global.

U.S. retailers heavily reliant on apparel sales may struggle to pass on costs to cash-strapped shoppers. If so, Kohl’s  (KSS)  could be in a tough spot. It’s already struggling and is closing underperforming locations. That’s also true of Macy’s  (M) .

“With a negative outlook on its ratings, Kohl’s has limited cushion to absorb further margin pressures,” said S&P Global.

The largest retailers have more buying power and a diverse product mix but won’t escape unscathed.

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Target  (TGT) , one of the biggest retailers, is more at risk than Walmart. Target nets less than 25% of sales from grocery and 75% from general merchandise often sourced overseas. 

“During the previous round of tariffs, Target CEO Brian Cornell sized the impact of tariffs at $50 million to $60 million per quarter in fiscal 2019,” said S&P Global.

Closely held tools retailer Harbour Freight has become a major player thanks to tools imported from China. Meanwhile, Home Depot  (HD)  and Lowe’s  (LOW)  not only sell products made overseas but also generate sales from lumber, much of which comes from Canada.

“Lowe’s has meaningful exposure to tariffs with 40% of its goods, which includes its own private brands, sourced internationally,” said S&P Global’s analysts.

Tariffs also create trouble for Best Buy,  (BBY)  given that it relies heavily on selling electronics that are often made in China. About “60% of its cost of goods sold originate in China and the second-largest country of origin is Mexico,” according to S&P Global.

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