Trump's Trade War Has Unified the World Against US Exports

Jeffrey J. Schott (PIIE) and Euijin Jung (PIIE)

July 11, 2018 3:45 PM
Photo Credit: 
Pablo Martinez Monsivais/Pool via REUTERS
  • US trading partners retaliating against US Section 232/301 tariffs—Canada, China, EU-28, and Mexico—accounted for $939 billion or 61 percent of total US merchandise exports in 2017.
  • Retaliatory tariffs affect $65.9 billion (out of $939.3 billion) of US exports or 7 percent of US shipments to those countries.
  • US products targeted by retaliatory tariffs represent 15 percent of global US exports of those products ($65.9 billion out of $435.9 billion).
  • Retaliatory tariffs hit a substantial share of US global exports of sorghum (93 percent), soybeans (65 percent), whiskies (54 percent), pork (42 percent), and almost one-third of cheese, apples, and steel.

President Donald Trump’s trade war reflects his administration’s strategy of trying to gain leverage against trading partners by dealing with them one by one. But like so much else about the president’s approach, this strategy has backfired. Instead of dividing US trading partners, Trump has unified them in their retaliation against his trade actions to protect US steel and aluminum industries and to counter Chinese high-technology policies.

In short order, Trump has provoked retaliation by Canada, China, the European Union, and Mexico, which account for more than 60 percent of total US merchandise exports.[1] While the aggregate retaliation to date covers only $66 billion of US exports, 15 percent of total US exports of those products, the impact on specific products is much greater because several countries are targeting many of the same products.

Is there a conspiracy among US trading partners to achieve this result? Probably not. They long ago learned to target trade retaliation to provoke maximum political backlash within the United States while minimizing the economic pain inflicted on their own consumers. Accordingly, they retaliate against US products for which they can find suitable substitutes from other countries (or from ramped up domestic production). The prime targets are US soybean, grain sorghum, and dairy farmers, pork producers, distillers, and automakers. Table 1 reports the value in 2017 of US exports subject to retaliatory tariffs.

Table 1 US exports subject to retaliatory tariffs (value in 2017, thousands of US dollars)
Products Canada China EU-28 Mexico Subtotalb Subtotal as share of US exports  to world, by product (percent) US exports to world
    Section 301a Section 232          
Pork - 1,159,490 1,159,490 - 1,244,024 2,403,514 42 5,741,581
Fish and crustaceans - 1,315,211 - - - 1,315,211 27 4,961,239
Cheese - 60,235 - - 383,239 443,474 30 1,455,235
Apples - 45,483 45,483 - 276,497 321,980 33 975,245
Coffee 404,926 - - - - 404,926 62 657,045
Grain sorghum  - 956,179 - - - 956,179 93 1,026,675
Soy beans - 13,934,014 - - - 13,934,014 65 21,591,012
Sauces 630,133 - - - - 630,133 38 1,670,744
Wine - - 74,794 - - 74,794 5 1,482,662
Whiskies 47,678 8,934 - 645,283 10,720 712,616 54 1,318,025
Cosmetics 55,905 - - 384,100 - 440,005 30 1,454,871
Paper towels 574,565 - - - 602 575,167 71 807,859
Steel 4,326,136 - 115,226 954,835 752,793 6,148,989 31 19,997,521
Aluminum 2,047,916 - 833,565 126,146 19,386 3,027,013 34 8,957,762
Autos and parts - 12,941,830 - - - 12,941,830 20 65,616,249
Motorcycles - - - 191,779 - 191,779 17 1,100,784
Motor boats and yachts 511,211 - - 370,668 10,323 892,202 58 1,530,684
Subtotal 8,598,471 30,421,376 2,228,558 2,672,810 2,697,584 45,413,826 32 140,345,193
Subtotal (percent) 67 90 75 82 76 69 - 32
Total retaliation 12,763,240 33,810,634 2,969,963 3,242,560 3,548,798 65,886,008 15 435,906,070
a. Tariffs on US products on China's Section 301 retaliation list are effective as of July 6, 2018. Pork and apples are on both Sections 301 and 232 retaliation lists.
b. Pork and apples are counted only once in subtotal.
Note: Products in the table are based on 6-digit HarmonizedSystem [HS] codes: pork (020311, 020312, 020319, 020321, 020322, 020329, 020630, 020641, 020649), fish and crustaceans (0301-0308), cheese (040620, 040630, 040640, 040690), apples (080810), coffee (090121), grain sorghum (100790), soy beans (120910), sauces (210310, 210320, 210390), wine (220421, 220422, 220429, 220430), whiskies (220830), cosmetics (330420, 330430, 330491), paper towels (481810, 481820 , 481830), steel (7206-7229, 7301-7326), aluminum (7602-7616), auto and parts (870323, 870324, 870333, 870340, 870350, 870360, 870370, 870380, 870390, 870431, 870840), motorcycles (871140 and 871150), and motor boats and yachts (890310, 890391, 890392, 890399). For more details, see underlying data.
Sources: Authors' calculations using data on US exports to the world from Trademap.org and data on imports of Canada, China, EU-28, and Mexico from the United States from Statistics Canada, Eurostat, and Trademap.org.

In some cases, US shipments are concentrated in one market: China bought 65 percent of US soybean and 93 percent of grain sorghum exports last year as well as 27 percent of US fish and crustaceans and 20 percent of US exports of autos and parts. US exporters earned $28 billion on shipments of those products to China in 2017. China’s imposition of an additional 25 percent tariff will sharply erode their sales and profits.

US pork exporters, already facing losses from Trump’s withdrawal from the Trans-Pacific Partnership (TPP) negotiated by President Barack Obama, have been hit by tariffs imposed by Mexico and China affecting $2.4 billion or 42 percent of their world shipments. Those two countries also have hit about $450 million of shipments of US cheese or almost a third of US cheese exports.

All four trading partners have retaliated against US steel and aluminum in reaction to Trump’s Section 232 measures, imposing tariffs on 31 and 34 percent of US exports of those products, respectively. Each country’s retaliation list also includes whiskey in a bow to local producers and a blow to Jack Daniels—affecting 54 percent of US global shipments.

As these numbers show, US industries and farmers are already getting slammed. If Trump escalates the trade war to another $200 billion of Chinese products, as he threatened to do on July 10, and extends US tariffs to $350 billion of US imports of autos and parts under a newly launched national security case, the cost in lost sales abroad, and output and jobs at home, will be substantially higher.

Note

1. Turkey and India also notified the World Trade Organization that they would impose additional tariffs against the United States in response to US steel and aluminum tariffs.

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