Unilever and Procter & Gamble face the risk of tariffs on Mexico threatened by Trump

Procter & Gamble and Unilever are among large packaged goods companies that would be exposed if US President-elect Donald Trump follows through with his threat to impose tariffs on Mexico, data seen exclusively by Reuters shows.

Trump warned days before his victory against Democratic candidate Kamala Harris that he would slap 25% tariffs on Mexico and China unless both governments took action to stop the flow of fentanyl into the United States.

While consumer companies have spoken publicly about their investments in Mexico to create a supply chain hub for the United States, the extent to which those supply chains expose them to US protectionism has not been previously reported.

About 10% of P&G's third-quarter shipments came from Mexico, according to bill of lading figures shared exclusively with Reuters by import data provider ImportYeti. According to the data, about 2% of Unilever's maritime imports to the United States come from Mexico.

Unilever and P&G declined to comment. Bill of lading data does not include air imports or truckloads of goods that companies bring into the United States by road.

Both the companies and other large consumer groups such as Pepsico, producer of Lay's soft drinks and chips, have collectively invested hundreds of millions of dollars in their Mexican supply chains.

That has led some investors since Trump's victory on Wednesday to examine Unilever and its peers' exposure to Mexico and China, where these companies have manufacturing bases and also earn a large share of revenue from sales.

Gabriela Siller, director of analysis at Banco Base in Mexico, said that exports represent 40% of Mexico's gross domestic product and 80% of them go to the United States.

Imposing tariffs on staples like packaged foods and soap could raise prices for Americans' everyday items if companies are forced to absorb the higher costs.

During Trump's first term in the White House, the United States imposed heavy tariffs on goods from several countries.
The trade war and subsequent Covid-19 pandemic highlighted how dependent global companies are on Chinese manufacturing and supply chains, leading companies – particularly those making packaged goods – to resort to nearshoring. “, or produce goods closer to where they are sold.

Unilever, Pepsico and other consumer company executives have spoken publicly in the past about beefing up their infrastructure in Mexico to help support global supply chains.

“P&G and other CPG (consumer packaged goods) companies that do matter may be affected, but that really remains to be seen,” said Michael Ashley Schulman, chief investment officer at Running Point Capital.

P&G, the world's largest personal goods and home care company with brands such as Gillette, Ariel and Head & Shoulders, said in 2019 that it would invest $4 billion in Mexico over the next two years.

Bill of lading data shows that P&G ships far more products from Mexico than Unilever or Pepsico, but has reduced ocean imports from that country since 2017.

In the third quarter of this year, P&G imported at least 4.5 million kilograms of product by sea, up from at least 7.9 million kilograms in the third quarter of 2017 early in Trump's first presidency, according to reports. data.

According to the data, in the last quarter Unilever imported more than 2 million kilograms of products such as Pond's face cream and Rexona deodorant to the United States by sea.

The data showed that the figure was higher than at least 1.4 million kilograms of product imported in the third quarter of 2017.
By contrast, Unilever's imports from China fell about 24% from the third quarter of 2017 to at least 296,000 kilograms in July-September this year, according to the figures.

Unilever said last year it would build a manufacturing plant in the northern Mexican border state of Nuevo León as part of a $400 million investment in the country over the next three years.