Canadian Pacific Kansas City Ltd (CP) stock plummeted 7.83% in pre-market trading on Monday, following analyst downgrades citing concerns over the impact of President Trump's trade tariffs on the transportation sector.
Loop Capital analyst Rick Paterson cut his rating on CP to "sell" from "buy", slashing the price target for the Canadian-listed shares to C$70 from C$125. In a research note, Paterson warned that the "inflationary" trade tariffs imposed by President Trump could cause short-term inflation and potentially push Canada and Mexico into a recession.
With the U.S. accounting for 75% and 80% of Canada and Mexico's exports respectively, Paterson believes the tariffs will hurt transportation companies like CP that rely heavily on cross-border trade flows. "If this tariff policy is maintained for more than a few months, it will likely put Canada and Mexico into recession," he wrote, adding that "all of the transportation companies we cover will be hurt by a simultaneous economic contraction north and south of the border, further exacerbating weakness in cross border flows."
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