The Mexico Tariff Risk Facing Unilever and P&G Under the New Trump Administration

Unilever

According to Reuters, major consumer goods companies such as Unilever and Procter & Gamble (P&G) are facing the threat of tariffs on Mexico under the incoming administration of U.S. President-elect Donald Trump.

Just before his victory over Democratic candidate Kamala Harris, Trump announced that unless Mexico and China stop the flow of fentanyl into the United States, he would impose a 25% tariff on both countries.

Many companies have made significant investments in Mexico as a supply hub for the U.S. market, but this is the first time the potential impact of U.S. protectionism has become so apparent. According to bill of lading data from import data provider ImportYeti, around 10% of P&G’s shipments in the third quarter this year came from Mexico, while approximately 2% of Unilever’s U.S.-bound sea imports were sourced from Mexico.

Gabriela Siller, from Banco Base in Mexico, pointed out that “about 40% of Mexico’s GDP depends on exports, and 80% of that is directed to the U.S.” If tariffs are imposed on everyday goods and food, American consumers may directly feel the impact on their cost of living.

Furthermore, during Trump’s first term, high tariffs were placed on imported goods, which led many companies to reduce dependence on China and move toward “nearshoring,” or producing goods closer to the market. For companies like P&G and Unilever, this shift reinforced the strategic importance of building infrastructure in Mexico. Michael Ashley Schulman, Chief Investment Officer at Running Point Capital, also commented, “The impact on consumer goods companies will depend on future developments”

The bill of lading data shows that P&G, after announcing a $4 billion investment plan in Mexico in 2019 over the following two years, has been adjusting its import volume. In the third quarter of 2017, the company imported over 7.9 million kilograms from Mexico, but this amount dropped to around 4.5 million kilograms in the same quarter this year.

On the other hand, Unilever has increased its imports from Mexico, reaching over 2 million kilograms this year, up from over 1.4 million kilograms in 2017. Unilever’s imports from China, however, have declined by about 24% since 2017, amounting to 296,000 kilograms in the third quarter of this year. Last year, the company also announced plans to build a new factory in Nuevo Leon, Mexico, with a $400 million investment over the next three years.

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