(Bloomberg) When White House press secretary Sean Spicer floated the idea of paying for a border wall with a 20 percent tax on Mexican imports, beer went flat.

Shares of Victor, New York-based Constellation Brands Inc. began falling Thursday: The company generates about 70 percent of its profit from importing Mexican brands like Corona and Modelo, and investors feared it would get hammered by the new tax. Constellation is far from alone in facing a reckoning if taxes or tariffs are imposed. U.S. companies that would suffer range from automakers like General Motors Co. to retailers such as Wal-Mart Stores Inc. and Kroger Co. and even medical-device producers like Medtronic Plc.

Hostilities between President Donald Trump and his counterpart, Enrique Pena Nieto of Mexico, could derail $584 billion in trade between the border nations. The relationship has made supply chains densely interconnected. American-made materials and parts make up 40 percent of the products Mexico exports to the U.S. Meanwhile, Mexico is America’s second-largest export market and third-largest supplier of imported goods.

“Because the economies are so far integrated, the industries that would be impacted are extremely broad,” said Caitlin Webber, a trade analyst for Bloomberg Intelligence. “It’s hard to think of a U.S. sector that wouldn’t be touched if there was a full-scale trade war with Mexico. It would really wreak havoc on the economy.”

Tax Balloon

The Mexican president scrapped his trip to Washington after Trump said he’d follow through on pledges to rewrite the North American Free Trade Agreement and charge Mexico to build a border wall. Spicer then responded by saying the U.S. could impose a 20 percent tax on all Mexican imports—a notion he later said was just one idea to finance the wall. Separately, congressional Republicans have been pushing a tax on all U.S. imports as part of their efforts at rewriting the corporate code.

Trump could likely impose a temporary tariff on his own authority, but would need Congress to impose what is known as an adjustable border tax on imported goods, according to Webber. Mexico would undoubtedly retaliate with its own tariffs and could revoke NAFTA benefits for U.S. exporters, she said.

Mexican Weekend

An estimated one-third of goods imported from Mexico last year were sold at U.S. retailers, according to the Trade Partnership consulting firm in Washington.

The pain of a trade war would spread to many facets of American life. Imagine sitting in a deck chair on the patio you built over the weekend, drinking a nice margarita. You’re wearing Bermuda shorts. Mexico helped at every turn:

Home Depot Inc., which sells pavers and landscaping gear, has sourcing operations in Mexico, and in 2015, the U.S. imported $10.7 billion in furniture. The price of your tequila would likely be higher. From 2010 to 2015, consumption of the spirit rose 30 percent by volume in the U.S., more than any other alcohol category except cognac, according to Euromonitor International. That spurred the world’s largest distillers, Diageo and Pernod Ricard, to increase investment in Mexico. Those fashionable shorts? The nation in 2015 imported $3.7 billion worth of apparel and accessories from Mexico.

But the relationship goes much further than this. Mexican imports also include oil, cars and lots of medical equipment. Medtronic alone has almost 1 million square feet of manufacturing space in the country for making products to treat cardiovascular disease. Spokesman Fernando Vivanco said the company was monitoring the dispute.

Trump has said America’s southern neighbor has taken advantage by not addressing trade deficits and border security, and sending undocumented immigrants who commit crimes and dilute the labor markets. Only a physical barrier—paid for by Mexico—can solve the problem, he has said. But U.S. shoppers would ultimately foot the bill for the wall, according to the National Retail Federation, an industry lobbying group.

Won’t Pay?

“The notion that Mexico is going to pay for this is wrong,” said David French, a senior vice president for the group. “This is going to be paid for by American consumers. A tariff is a just a tax on consumers. Americans are already paying billions of dollars in tariffs, and this is just going to result in one more price increase.”

Retailers’ exposure to increased import taxes is now being considered by investors, said Mike Balkin, an investor in small-cap stocks at William Blair Investment Management LLC.

“There are so many things companies are trying to deal with, and it’s just one more,” Balkin said.

“It’s bad news,” said Trevor Stirling, an analyst at Sanford C. Bernstein. “It’ll slow down growth.”

- Matt Townsend

Bloomberg News