U.S. Tariffs and Their Potential Impact on Cemex and Pemex
Assessing the Broader Credit and Risk Implications for Cemex and Pemex
Mexico
Mexico's economy is highly exposed to U.S. tariffs due to its deep trade integration with the United States, underpinned by the United States-Mexico-Canada Agreement (USMCA). In 2023, 75.3% of Mexico’s exports went to the U.S., rising to 75.8% in the first nine months of 2024. This makes it the most dependent economy in Latin America on American demand. This heavy reliance spans key industries such as automotive manufacturing, electronics, and agriculture, where supply chains are tightly linked across the border.
Moreover, Mexico serves as a key production hub for U.S. companies, benefiting from lower labor costs and geographic proximity. Many industries operate within North American supply chains, meaning that tariffs on Mexican goods can disrupt operations, increase costs, and reduce competitiveness. Given the scale of these trade flows, any imposition of tariffs by the U.S. could create significant ripple effects on Mexico’s economic growth, investment climate, and employment.
Cemex
Cemex has been advancing its growth-oriented portfolio optimization by executing strategic divestments, particularly in selected Emerging Markets, to streamline its holdings and drive further investment in the U.S., Mexico, and Europe, primarily through bolt-on opportunities. Consequently, we expect Cemex’s exposure to the U.S. to continue increasing in 2025, given the company’s strategy and the divestment of its Dominican Republic operations, which represented 2.1% of 2023 revenues and 4.2% of EBITDA. In the last twelve months ending in September 2024, the company generated approximately 31% of its revenues in Mexico and 31% in the U.S., while 44% of its EBITDA came from Mexico and 29% from the U.S.
Even though U.S. tariffs would not significantly affect Cemex’s exports from Mexico to the U.S., the company has sizeable operations within the U.S. and exports only a small portion of its output. However, the broader economic impact of tariffs on Mexico, including potential currency depreciation and a recession, could weigh more heavily on Cemex’s domestic operations. This is particularly relevant given the substantial portion of EBITDA the company generates in its domestic market.
Despite these risks, Cemex’s credit-positive strategic priorities, commitment to strengthening its credit profile, end-market diversification, solid credit metrics, and ample liquidity provide some level of comfort in its ability to navigate tariff uncertainty. However, if the U.S. imposes tariffs on Mexico, we expect a meaningful negative impact on Cemex’s operational performance, particularly in its domestic market. As a result, we would anticipate credit metrics to deteriorate. This risk is further magnified by the fact that much of the positive outlook for Cemex has been based on expectations of robust infrastructure and housing spending in Mexico, supported in part by nearshoring and government-led investment. If tariffs lead to a sharp economic slowdown, many of these initiatives could be delayed or scaled back, exacerbating the negative impact on Cemex’s domestic operating performance and credit profile.
Pemex
The U.S. market represents a meaningful portion of Pemex’s crude exports. In 2024, the company exported 460 kbd, accounting for 57.1% of total exports and 26.5% of total production of 1,741 kbd, which includes contributions from partners. Pemex has reduced its overall exports in recent years, primarily due to production declines. In comparison, the company exported approximately 638 kbd to the U.S. in 2022 and 720 kbd in 2023, representing 66.9% and 69.7% of total crude exports, respectively.
Consequently, potential U.S. tariffs on Mexico could significantly negatively impact Pemex. Even though the company has some capacity to redirect exports to Europe and other regions, this could lead to additional logistical costs and lower realized prices, further affecting operational performance.
Additionally, Pemex’s credit story remains highly dependent on financial support from the Mexican government, given its unsustainable standalone credit profile, which is characterized by a significant debt burden, weak liquidity, high debt service costs, and persistent negative cash flows. Potential tariffs would likely put further pressure on the overall Mexican economy, which serves as the implicit guarantee for Pemex’s debt, reducing the government’s ability to provide support. Mexico is already projected to run a 3.8% fiscal deficit in 2025 without accounting for tariffs, which would likely widen if tariffs were implemented. This could lead to significantly lower confidence in the government’s capacity to back Pemex’s debt, further weakening the company’s credit profile.
This uncertainty compounds existing challenges, including ongoing payment delays to suppliers and contractors, with outstanding debts totaling P$402.9 billion (US$19.6 billion) as of September 2024. These concerns, combined with production declines and deteriorating operational metrics, will likely increase Pemex’s reliance on government assistance.
See Also:
Pemex: Lack of Concrete Action Weights on the Outperform Thesis
Initiating Coverage on PEMEX: Set to Outperform on Reclassification Potential
Cemex: The Promising Credit Story of a Regional Leader in the Cement Industry
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