President Donald Trump's plan to put tariffs on all imports from Mexico has drawn fire from both sides of the border and both sides of the aisle, with critics warning that the levies could have drastic implications for companies and consumers alike. The auto sector, with its heavy reliance on Mexico as a production center, would be among the biggest losers, a data analysis shows.

The White House said May 30 that it would impose tariffs of 5% on all imports from Mexico, one of the U.S.'s largest trading partners, beginning June 10 if the southern neighbor does not address Trump's concerns about Central American migrants crossing the Mexican border into the U.S.

According to Trump, the 5% tariffs would go into effect June 10, but if the president remains dissatisfied with Mexico's immigration response by July 1, the tariff rate would rise to 10%. Depending on Mexico's response, other rises — to 15% on Aug. 1, to 20% on Sept. 1 and to 25% on Oct. 1 — could also be in store. Tariffs would stay at the 25% level "unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory," the White House said.

High-dollar impacts on auto business, other sectors

The U.S. imported $346.2 billion of goods from Mexico in 2018, according to Panjiva, a business line of S&P Global Market Intelligence. At a 5% tariff rate, this would translate to U.S. companies paying $17.3 billion in tariffs on an annual basis. Hardest hit would likely be automobiles given the U.S.'s $35.0 billion in imports in 2018, along with an additional $24.7 billion in imported auto parts and $22.8 billion in commercial vehicles that year, according to Panjiva data.

"A poster child would be the new Bayerische Motoren Werke AG plant opening next week in Mexico, right in time for the tariffs," according to Panjiva.

Global automotive stocks declined sharply during Friday trading, even for companies not directly exposed to the U.S.-Mexico dynamic. The tariff proposal may have sunk hopes that the Trump administration could soon back off of similar levies he has suggested for EU-made cars.

Marc-René Tonn of Warburg Research in Hamburg, Germany, said that looming U.S.-imposed tariffs are "on the radar" but their prospective impact is difficult to pinpoint, given the lack of specificity in terms of the duration and magnitude.

"There are a lot of these discussions and tensions between the U.S. and China and the U.S. and Europe so it is hard to say it will reduce profits at company X by X amount. When you look at the (market) variation versus the official (stock price) estimates obviously people believe that the estimates contain a not insignificant downside potential," Tonn said. "I think Volkswagen AG is presumably vulnerable. Recovering anything like tariffs with pricing is comparatively difficult. They may decide to reduce volumes and redistribute (to other countries)."

Volkswagen, whose stock price fell 2.8% on May 31, told S&P Global Market Intelligence it would not comment unless the tariffs became certain, but sales data the company provided showed the automaker would be critically exposed should the measure go ahead. Of the 638,300 Volkswagens sold in the U.S. in 2018, 301,200 were imported from Mexico. Of the remainder, 101,100 were U.S.-made and 236,000 built in Europe.

Fiat Chrysler Automobiles NV, whose stock fell 4.8%, would have a mixed bag of exposure to tariffs. The company's Italian-branded products, the Fiat 500s, are imported into the U.S. from Toluca, Mexico, but have seen declining sales. By contrast, the U.S. Jeep-branded SUVs and off-roaders, Dodge SUVs would be a more critical area of exposure to potential levies for the company.

Mexico hosts the plants of a significant number of Japanese manufacturers including all of whose stocks slipped significantly on May 31: Toyota Motor Corp. was down 2.9%, Mazda Motor Corp. 7.1%, Honda Motor Co. Ltd. 4.3% and Nissan Motor Co. Ltd. 5.3%.

Those products most at risk include those made by companies that rely on cross-border supply chains where finished goods can be reexported several times.

Beyond automobiles, other top products at risk include computers, $26.4 billion of which were imported from Mexico in 2018, according to Panjiva, while telecom equipment imports were valued at $10 billion that year. Crude oil imports from Mexico, totaling $14.5 billion for the year, would also be affected.

Lawmakers, business community warn against tariffs

The White House's tariff plan drew immediate backlash from Mexican President Andres Manuel Lopez Obrador. "President Trump: social problems are not solved by taxes or coercive measures," Obrador wrote in a letter to Trump, noting that the tariffs would ultimately harm the two countries' relationship. Obrador added that he does "not want confrontation."

Stateside, lawmakers on both sides of the aisle challenged the wisdom of Trump's approach.

"As our third biggest trading partner, a healthy and vibrant economic relationship with Mexico is a vital source of our joint prosperity," Senate Majority Leader Mitch McConnell said. "Any proposal that impacts this relationship deserves serious examination and I look forward to discussing this plan in greater detail with my colleagues and the administration."

Ron Wyden, an Oregon Democrat and ranking member of the Senate Finance Committee, also expressed concern given that the "tariffs he's [Trump is] proposing are paid by American consumers" and that trade policy "retaliation" from Mexico would hurt U.S. workers.

The business community, including the U.S. Wheat Associates, was also on heightened alert. Previous retaliatory tariffs from Mexico have targeted U.S. agricultural exports, and the group warned that the potential fallout for farmers "would be like struggling to survive a flood then getting hit by a tornado."

Kenneth Smith-Ramos, the director of the Trade and North American Free Trade Agreement Office at the Mexican Embassy in Washington and a former NAFTA negotiator for Mexico, warned that the tariff Trump has suggested would not only violate NAFTA but also World Trade Organization commitments. "Considering that Mexico exports upwards of $350 billion to the U.S., Mexico's retaliation against such a measure would be off the charts," Smith-Ramos said in a tweet following the announcement.

Trump suggested in a statement that companies doing business in Mexico could consider moving their production to the U.S., in which case they would not have to pay the tariffs. But the U.S. Chamber of Commerce countered that companies are unlikely to move their production in response to the policy. Rather, the tariffs' primary impact would be to raise costs for U.S. consumers and businesses, without addressing migration issues, the Chamber said.

"The last thing we need to do is ratchet up the self-inflicted harm on the U.S. economy," John Murphy, the Chamber's senior vice president for international policy, said on a call with reporters May 31.

The Chamber said it was weighing legal action against the White House to prevent it from implementing the tariffs, though it did not specify a mechanism for doing so.

Trump's tariff announcement comes amid consideration of the U.S.-Mexico-Canada Agreement, the deal that would replace the existing NAFTA that governs trade in the three countries.

Considerable progress had been made in recent weeks toward passing the deal, including the U.S. lifting its steel and aluminum tariffs on Canada and Mexico and the three countries taking steps to introduce legislation for the deal. But imposing a sweeping tariff on Mexico would likely undercut any positive developments, the Chamber warned.

Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.