Constellation Brands Shares Drop Due to Trump's Tariff Plan

On Monday, shares of Constellation Brands fell after President-elect Donald Trump announced plans to impose significant tariffs on key U.S. trading partners. This could have serious implications for the company. Trump, who will assume office on January 20, announced a 25% tariff on imports from Canada and Mexico to combat illegal drugs and immigration issues. Additionally, he indicated plans to impose a 10% additional tariff on goods from China, building on previous tariff threats.

These measures were detailed in Trump’s posts on Truth Social and include some of his most concrete statements regarding economic policy since his election victory. Constellation Brands, recognized for its imports from Mexico, could be particularly affected by these tariffs. The company’s sales and segment EBITDA are heavily reliant on Mexican imports, with figures showing that 86% of sales and 94% of segment EBITDA year-to-date stem from sources in Mexico. Analysts noted that despite potential measures to mitigate the impact, such as cost-saving or inventory adjustments, tariffs could still pose a significant challenge for Constellation.

According to a Roth equity analyst, there are several possible outcomes for Constellation Brands: tariffs may not be implemented and could instead serve as a starting point for negotiations; the company might receive an exemption; or the brand’s pricing power could absorb some of the cost increases. To fully offset a 25% increase in costs for goods sold for beer, Constellation would need to raise beer prices by roughly 12% to maintain its fixed gross profit figures.

Similarly, shares of Brown-Forman also experienced declines, reflecting the broader impact of the tariff announcement on import-dependent companies. Potential tariffs raise concerns for businesses reliant on international trade as they adjust to the new administration’s policy changes.