While most global stock markets fell Thursday, Mexico's bourse rose as that country and Canada were spared so-called reciprocal tariffs deployed by the U.S. late Wednesday.
The IPC index rose 1% Thursday afternoon to its highest level since mid-July. The index bottomed at the end of last year and is up more than 12% this year so far, according to FactSet data.
President Donald Trump left both U.S. neighboring countries off Wednesday's listed new round of trade tariffs. The news came as a relief to investors in Canada and Mexico.
Other, existing tariffs already imposed on Canadian and Mexican goods remained in place. Plus, new levies that affect the auto sector came into force Thursday, Bloomberg reported.
Trump had imposed a 25% tariff on imports from Canada and Mexico plus a 10% levy on Canadian energy products that took effect March 4. Goods that comply with the U.S.-Mexico-Canada Agreement remain exempt.
The Mexican peso and Canadian dollar were down about 1% vs. the U.S. dollar Thursday, although both currencies came off session lows. In Toronto, the S&P/TSX Composite was down nearly 3% in afternoon trading, nearly wiping out all gains for the year.
Mexico Stock Market Outperforms
In a sea of red across most world stock markets, Mexico's IPC was the best-performing index among those tracked by FactSet.
The largest component of the Mexico index is Fomento Economico de Mexico. The bottler of Coca-Cola beverages represents 10% of the index, according to FactSet. U.S.-traded shares of the company climbed 2.5% Thursday afternoon. The stock has reclaimed its 200-day moving average as the stock recovers from its Jan. 3 low.
Other Mexico-based stocks trading in the U.S. include cement supplier Cemex, airport operator Grupo Aeroportuario del Centro Norte, retailer Wal-Mart de Mexico and wireless service provider America Movil.
Tariffs threaten a recession for Mexico's economy because one-third of the country's GDP is from exports, and around 80% go into the U.S., Jeffrey Kleintop, managing director and chief global investment strategist at Charles Schwab, said in a March 24 report.
Top Five Mexican Stocks Dodge Tariffs
Yet the impact on Mexican companies may be softened because Mexico's largest exports to the U.S. are goods produced by U.S. companies operating in Mexico, Kleintop added. Mexico's biggest exporters are automakers based in the U.S.
In addition, a lot of Mexican companies have large operations inside the U.S., such as Cemex. Those goods would not be subject to tariffs.
"In fact, four of the top five Mexican stocks that make up more than 50% of the MSCI Mexico Index are not likely to be directly affected by the tariffs, because they serve the Mexican market (including a bank, a telecom provider, Mexico's Coca-Cola distributor, and Mexico's Wal-Mart)," Kleintop said.
Nearly all international stock markets fell Thursday in reaction to Trump's sweeping tariffs of at least 10% on dozens of countries.
But two other Latin America stock markets rose: Brazil's Bovespa edged up by less than 0.1% (it's up 9% year to date) and Chile's IPSA rose 0.3% (up 15% YTD). Chile's valuable copper exports avoided U.S. tariffs, according to reports.
