Where do Americans get their goods from at a trade war with Mexico and Canada
Where do Americans get their goods from at a trade war with Mexico and Canada
In New York, the designated President Donald Trump is apparently very interested in starting a simultaneous trade war with the three largest trading partners in the United States: Mexico, China and Canada. The costs that the US consumers may have to take on could be mitigated if companies are encouraged to avert from these countries. But where could you go instead?
merchant data and effects on the US economy
These three nations alone made up more than 40% of the total value of all goods that the USA imported, as can be seen from the data of the foreign trade. Trump has recently announced that it would raise additional tariffs of 10% to Chinese imports, in addition to the existing tariffs. During his election campaign, he also spoke of a comprehensive custom of 60% of Chinese goods. For Mexico and Canada, he terminated a New customs fee on all imports, on the day of its great Strength.
The effects of higher tariffs on US production
In Trump's ideal world, these higher tariffs would boost domestic production, as US companies could completely escape the tariffs. In order to put further incentives to move production to the USA, Trump also has tax reliefs . However, many experts, including Daniel Anthony, Managing Director of Trade Partnership Worldwide, an economic research group, do not believe that this will lead to a significant increase in domestic production. According to Anthony, during Trump's first term in which he introduced higher tariffs to Chinese goods, "very little production back to the USA".
The largest countries that are considered for companies
The limits for relocating production to the USA are diverse. A lack of suitable infrastructure in the United States often prevents certain goods. Even if this infrastructure were available, the shift of production to the United States would usually lead to significantly higher production costs that are inevitably passed on to consumers.
Vietnam as a potential main actor
trade experts agree that Vietnam could be a main candidate for companies who want to shift their production because the production costs there are relatively low. Between 2017, when Trump took office, and in 2023 Vietnam increased its exports to the United States more than doubled from $ 114 billion last year. However, Anthony warns: "If many companies want to go to Vietnam at the same time, this could be problematic. You could quickly reach capacity limits." In addition, production could become more expensive because the suppliers react to higher prices to the increase in demand.
alternatives in the automotive industry
clothing and shoes
If there is a new trade war between the three countries, the Americans could increasingly receive clothes and shoes from Indonesia, Bangladesh and Cambodia. According to the spring merchant data, the United States has been importing more and more clothing and shoes from these four countries in recent years.
electronic industry
Vietnam is not the only country that could benefit from a shift in production. Taiwan, the third largest exporter from electronics to the USA, could further increase production. Other Southeast Asian countries that have exported more electronics goods to the USA in recent years, such as Malaysia, Thailand and Japan, are likely to increase production. In addition, South Korea and Japan have realized currency profits that make it easier for Americans to buy products from these countries.
companies that may remain
Many companies may have existing contracts for the production of goods at certain locations over a specified period. However, even without such contracts, companies do not try to avoid tariffs, but strive to minimize the total production costs for the best possible product. This means that some companies could be willing to accept higher tariffs instead of changing if this is ultimately the cheaper option.
A concise example: Even after Trump introduced higher tariffs to Chinese imports in 2018 that were largely maintained by President Joe Biden, the USA did not fully set the import of goods from China; They only reduced the volume. In 2017, 60% of all US computer exports came from China, 2022 only 39%.
Overall, the USA in 2017 imported were worth $ 500 billion from China, which made 22% of all US imports. In 2022, the imports from China were $ 427 billion, which only corresponds to 14% of the total US imports. During this time, imports from Mexico and Canada grew by over $ 100 billion, since the tariffs were approximately zero due to the United States-Mexico-Canada Agreement. This helps to explain why Mexico China has overtaken as the largest exporter in the United States.
Nevertheless, Setser thinks that no car manufacturer “wants to give up his expensive investments in Mexico”, especially since Mexico may be spared higher tariffs, while Trump seems to be ready to negotiate with them than with China. "The challenges when moving from China are considerable. There is simply an overcapacity and the production costs are very low."
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