Fitch Ratings says cash-strapped Pemex could face serious headwinds if tariffs go up starting next week.
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Automakers, alcoholic beverage companies and energy companies are directly exposed to trade risk. All of them have bonds held by U.S. investors. Their ability to mitigate potential cash flow and credit implications of increasing tariffs varies company to company. Of note, Fitch said that Mexican oil firm Pemex is one of the two most vulnerable corporate bonds, followed by Kaltex.
Depending on the duration of tariffs, and how high they go, there would also be indirect effects on Mexican companies linked to the broader macroeconomic repercussions of new trade tensions. “The latest tariffs represent a ratcheting up of trade tensions and would hit growth, not just in Mexico but also in the U.S.,” says Keith Wade, chief economist for Schroders, a U.K. wealth management firm. His macro-models suggest U.S. GDP would come in 0.7 percentage points weaker in 2020 with tariffs on Mexico. “This would put the U.S. in recession,” Wade says.
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