Despite multiple tariff announcements, China only has 10% extra
We entered a month of Trump’s second term, and tariffs have been the area of focus.
Since there is a lot to track, we have a trusted tariff tracker (the table below) that brings together all proposed, promulgated, delayed, resolved and studied tariffs – when it will take effect.
So far, only 10% tariffs on China have come into effect (President Trump said yesterday that a trade agreement with China is “possible”. The rest are in trouble, and there is a question whether the delayed tariffs in Canada and Mexico will be watered or will never take effect.
With all this uncertainty in mind, let’s focus on what we know.
1. Exports are more important to other countries than to the United States
First, trade is a small part of the U.S. economy.
Overall, exports are less than 11% of the U.S. GDP, while commodity exports are particularly 7% of GDP.
But this is not the case for most other large economies.
exit The United States (picture below, dark blue bar) is more important than other economies import The United States is crucial to the U.S. economy (light blue bar).
For example, Mexico’s export compensation to the United States One quarter Mexico’s GDP, but Mexico imports from the United States by 1% of the United States’ GDP. For Canada, One fifth Their GDP is versus 1% of the U.S. GDP (again).
These are the countries of the United States most Rely (EU as a group is only slightly larger).
Since exports are a small part of the U.S. economy, limiting the amount of tariffs could lead to higher prices and reduced demand. However, tariffs Can It has a greater impact on countries that rely more on U.S. exports.
2. Tariffs are still important to transaction models
Although the impact on the U.S. economy may be limited, tariffs are still important to trade patterns.
In 2018, during President Trump’s first term, he was mostly China-centered tariffs.
Since then, China’s share of imports in the United States has almost halved (picture below, red line) – limiting the inflationary impact of tariffs as companies change suppliers or supply chains to mitigate the additional cost of imports from China.
As China’s share declines, other countries’ share rises as companies choose to purchase goods from other places. Data show that this benefited China’s neighbors (Taiwan, South Korea, Vietnam) as well as Mexico (“nearly intercourse”) and the euro zone (“Friendshoring”).
The difference between President Trump’s first and second term is that this time he proposed a wider tariff. However, if we end up with different tariff levels for different countries (e.g., Canada is 25% and Europe is 10%), then we will most likely see our imports shift to those with lower tariffs as possible country.
Given the uncertainty of tariffs, it is still too early to speak out their impact
But many economists and experts expect President Trump to use these tariffs as a negotiated tool for ultimate bilateral deals with the state. If so, the already small impact of tariffs will eventually become smaller. However, given the uncertainty of the final form of tariffs, it is difficult to say much about their exact impact at present.
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