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Impact on U.S. exports:
- U.S. exports could decrease by 22 percent due to tariffs on imports from Canada, Mexico, and China.
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Impact on Canada:
- Exports could fall by 28 percent with countermeasures from the U.S.
- Without countermeasures, Canada could see a 17 percent decline in exports.
- Industrial value added could decline by 14 percent in the medium term (15 percent without countermeasures).
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Impact on Mexico:
- Exports could decrease by 35 percent with countermeasures.
- Without countermeasures, Mexico could experience a 21 percent drop in exports.
- Industrial value added could decline by 13 percent (10 percent without countermeasures).
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Impact on China:
- Exports could decline by 3.8 percent with countermeasures.
- Without countermeasures, China’s exports would fall by 2.7 percent.
- Industrial value added could decrease by less than 1 percent.
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Impact on Germany:
- Exports could increase by 0.5 percent due to displaced exports from Canada, Mexico, and China.
- However, potential future tariffs on U.S. imports from the EU could significantly reduce this growth (growth expected to be slim).
Donald Trump’s tariffs on imports from Canada, Mexico, and China could have significant global economic repercussions, according to research from the Munich-based Ifo Institute. The tariffs could reduce U.S. exports by up to 22 percent. While China would see a relatively mild impact (a 3.8 percent decline), neighboring countries like Canada and Mexico would be severely affected.
Canada is expected to face a dramatic 28 percent drop in its total exports due to the U.S. tariffs, while Mexico could see a 35 percent decline. This is because of their close economic ties to the U.S. through geographical proximity. In contrast, China, despite facing tariffs, has the flexibility to shift trade to other markets, limiting the overall damage.
Germany could see a slight increase in exports, up 0.5 percent, as it benefits from reduced competition from the U.S.'s tariffed neighbors. However, this gain is tempered by the possibility of Trump imposing tariffs on EU imports, which could significantly counteract any export growth from Germany to the U.S.
In terms of industrial output, Canada and Mexico are projected to face major losses. Canada’s industrial value-added could decline by 14 percent in the medium term, while Mexico’s would slump by 13 percent. China's industrial value-added would drop by less than 1 percent. Without countermeasures, these figures would be even higher, with Canada seeing a 15 percent decline and Mexico a 10 percent drop.
While the U.S. would also face a reduction in exports, at 14 percent under countermeasures or 21 percent without, the global economy as a whole would be affected by these trade disruptions. The Ifo Institute’s analysis underscores the complex and interconnected nature of international trade, highlighting the risks of aggressive tariff policies and their potential to damage global economic stability.
Read comments and analysis on the tariff war between the U.S., Canada, Mexico, China, and the EU.
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