MercadoLibre stock slipped in Thursday trading after President Donald Trump said he would place a 50% tariff on imports from Brazil.
Brazil is the largest market for MercadoLibre, which operate an e-commerce platform and offers financial technology services in 18 countries in Latin America. MercadoLibre's U.S.-listed MELI stock has been a top performer among e-commerce stocks this year. Shares have rallied 40% year to date.
But MercadoLibre stock shed more than 2% to 2,412.91, with larger-than-usual volume, in recent action on the stock market today. U.S.-listed shares of Brazilian digital banking provider Nu Holdings were down 6.5% in recent action, while The iShares MSCI Brazil ETF was down 2% in recent trading.
In a letter posted on social media late Wednesday, Trump accused the Brazilian government of conducting a "witch hunt" against former President Jair Bolsonaro, who is facing a trial for allegedly trying to overthrow the government to stay in power. Trump also accused Brazil of censoring the operations of social media companies, and said the U.S. has a "very unfair" trading relationship with Brazil.
Brazil President Luiz Inacio Lula da Silva responded on X, saying his country will respond with reciprocity to any new tariff. He also highlighted U.S. data showing the U.S. has a trade surplus with Brazil.
About half of MercadoLibre's $5.94 billion first-quarter sales came from its Brazil operations, according to FactSet. Mexico is the company's second-largest market, followed by Argentina, where MercadoLibre was founded.
Analysts with UBS wrote Thursday that "Brazil is a relative closed economy with total exports roughly 18% of GDP, and only 12% of exports going to the U.S."
But "persistent FX (foreign-exchange) weakness is a risk to watch since it could weigh on domestic financial conditions and investment flows," UBS analysts said.
MercadoLibre Stock Up 40% This Year
Entering Thursday trading, MercadoLibre stock held a best-possible IBD Composite Rating of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one score.
The score places MercadoLibre as the second-best rated stock among 59 in the Retail-Internet industry group tracked by IBD. Only DoorDash ranks higher.
MercadoLibre stock had a brief breakout on July 1 above a 2,635.88 flat base buy point, according to IBD MarketSurge. However, shares reversed below the entry amid broader stock market pressure that same day.
The slide Thursday adds to a rocky start to the month for MercadoLibre stock. Shares are down 8% this month after gaining 2% in June and 10% in May. MELI stock broke decisively below its 21-day and 50-day exponential moving averages Thursday, a bearish signal.
