World exporters are looking for new customers if Trump cuts trade

Unlock the publisher’s digest free

He would reach the heights of the Himalayan madness for Canada, China and Mexico to assume that they saw the last of Donald Trump raising prices. This week, their governments all faced the threat. To prevent the threat of 25% of import taxes, the Mexican president Claudia Sheinbaum and the Canadian Prime Minister Justin Trudeau have executed what I call “soybean shuffle”. The term recalls the president of the European Commission at the time, Jean-Claude Juncker, notify the prices of the car in 2018 by promising Trump that Europe would buy more it was already.

Mexico and Canada announced this week the deployment of troops and border staff who were already there to combat the flow – minimal in the case of Canada – through the border of fentanyl opioid. China has imposed modest increases in energy prices, more distributions on exports of critical minerals (which have Never really worked) and a vaguely written survey on Google.

But Trump will come back to find out more and widen his goals to include EU and average income outside China. He has an individual Animus against Vietnamwhich he correctly considers as a platform for the production of offshore and offshore production of the supply chain for China. Cut exporters of the United States must find new markets.

I discussed The fact that the threat of American prices against China diverts Chinese exports in these countries and the worsening of “China Shock 2.0” can be exaggerated. Trump’s first term has shown that emerging savings taking the share of China on the American import market.

But the United States trying to reduce global imports will be seriously destructive for foreign exporters and for itself. This week elimination Of the $ 800 “minimis”, a customs without customs for China, Chinese electronic commerce companies such as Tamu and Shein. However, Trump also plans to impose prices and end these minimis exemptions for other countries.

Trade between intermediate income savings is becoming more and more important. The BCG council projects the trade in products between China and other emerging economies up by an annual growth rate of almost 6% in real terms between 2023 and 2033. Trade growth between high income countries and the China will be barely positive.

But part of this simply reflects the addition of additional steps to value networks delivering goods to the United States. High income savings are not cut off from the image. Trade between countries with an intermediate income to the exclusion of China will increase by 3.8% and between these intermediate income countries and the countries rich by 3.7%.

Certainly, The world can adapt. Growth models can change. But the American consumer Vorace will be difficult to replace quickly. Currently, as trade has recovered from the initial shock of Ukraine war, American imports have increased much faster than the world as a whole, while the growth of Chinese imports has dropped. While David Lubin of the Catham house reflection group in London (usual warning: I am an unpaid associate scholarship holder), the exporters find themselves taken in a battle of mercantilisms, China and the United States seeking to increase exports relating to the relative imports.

Line of the annual growth of real imports, percent showing that American consumers conducting purchasing costs

The economic work of China, with the low domestic demand after the burst of the bubble of goods, repelled the governments of Beijing and the regional governments towards their familiar model led by export. In terms of volume, Chinese exports increased at an annual rate of 13% in the third quarter of last year, much faster than global import growth at less than 1.5%. Lubin frankly calls this a “predatory” trade policy, aimed at seizing market share in other countries. He says that the simultaneous desire to reduce imports has a geopolitical end, “to make China less dependent on the rest of the world and the rest of the world more dependent on China”.

Over the past two years, there has been a wave of anti -dumping and other emergency rates in developing economies to protect their companies against Chinese competition. Until now, they have focused on industrial inputs such as steel – politically highly publicized but not a large part of the world value added in trade. But if the American demand is stifled, the pressure to widen them will increase.

As for the other sources of final demand, the emerging economies themselves, in particular in Asia, consume more because they enrich themselves. But the countries of East Asia are generally net exporters: Malaysia, Singapore, Thailand and the Philippines have generally organized current account surpluses since the Asian financial crisis in 1997-1998, just like Korea in South Korea and Japan. Meanwhile, the EU, which fights to increase growth while Germany remains obsessed with exports, is also unlikely to take the consumption stick.

This can complement future problems for countries that export to the United States, in particular highly exposed economies such as Canada and Mexico. Trump’s economic policies encourage a broader American trade deficit, the opposite of what he wants. Its planned tax reductions will increase consumer demand and suck imports. His prices will make us less competitive exporters by strengthening the dollar, which import taxes tend to do.

It will not be pretty if Trump begins to deploy entire prices to prevent the United States from being a consumer of the last resort while implementing policies that guarantee that he remains. Exporters will chase the world for rare demand. As I said beforeThe real threat to the global economy is not the rejigment of supply chains. This is the danger that the most reliable market for global exports decides to bite economic growth to reduce its trade deficit and there is not enough demand elsewhere to replace it.

[email protected]