dOrdo Trump is a self-declared “major believer” in tariffs on foreign goods, using them to boost the U.S. economy and revitalize America’s industrial heartland, the numbers that sent him back to the White House. He promised to reward 10 million voters.
“Make your products in America,” the president told top executives gathered at the World Economic Forum in Davos this week, promising lower taxes to those who would usurp him by invitation. “But if you don’t make a product in America, and this is your prerogative, then, quite simply, you have to pay tariffs.”
Trump has repeatedly claimed that “tariffs” are the “most beautiful word” in the dictionary, but economists and U.S. importers have warned that the consequences of his plan, if implemented, will be ugly.
Exporters around the world are enduring a period of turmoil and uncertainty as the new administration threatens to impose new tariffs to clean up next month.
China
Philip Wen
Kam Pin Industrial was able to shrug off the wave of tariffs it faced during Trump’s first administration.
The building products company manufactures industrial coatings and metal sheets in Donguguan, an industrial hub in southern China. 1990s.
The subsequent surge in China’s exports built the country into a global economic power. Trump and his allies claim they can reverse this extraordinary rise and make America wealthy again.
But when Trump imposed the 25% levy in 2018, Kam Pin’s products were cheaper than those of its closest rivals in South Korea and Thailand. U.S. real estate developers continued to buy at higher costs.
Things aren’t going to be rosy now. According to owner and managing director Danny Lau, its U.S. orders have dried up this year. China’s own economy is also in decline.
“This year is really poor,” Lau said. It may be about to get worse.
Trump has further threatened 10% tariffs on Chinese goods, which will increase Kampin’s cost level with South Korea.
Add 25% and even local U.S. manufacturers are price competitive, says Lau. “Of course, the increase in tariffs affects all products from China. It certainly affects us.”
The president threatened Beijing with much higher tariffs on the campaign trail, piling uncertainty on companies like Kam Pin. “He could change at any time,” Lau said.
There is little such companies can do to reduce the impact of measures that are being denied by Trump and his allies. “Even if we move the production line to Southeast Asia,” Lau said. “He may start raising tariffs in those countries.”
Mexico
Mie Hoejris Dahl
Trump is threatening 25% tariffs on Mexico and Canada unless the country curbs migration and drug trafficking into the United States.
“There is a lot of fear and uncertainty right now,” said the chief executive of one of Mexico’s largest car companies.
But politics often involves business. If Trump implements the threatened tariffs in Mexico, major auto companies have calculated that overall Mexican car sales could drop by up to 12%.
The auto industry is expected to be hit the hardest, said Diego Maroquimvitar, a North American scholar at the Wilson Center. “The more integrated you are, the more exposed you are.”
Once a car is manufactured, auto parts may cross borders several times and have to pay customs duties each time.
Some sectors are less worried. “We don’t think much will happen,” said Andrea Urquiza Roiz, CEO of Zimafresh, a Mexican pepper and blueberry exporter, even though about 90% of exports go to the United States. Ta.
In 2019, Trump threatened Mexico with tariffs on blankets starting at 5%, but this was averted after negotiations. Such experiences have led some business leaders to doubt Trump’s resolve. Urquiza considers Trump’s threat empty and believes that even if agricultural tariffs were imposed, they would not last long because the United States would not be able to meet domestic demand.
Moreover, Urquiza said the agricultural sector is used to uncertainties, from the climate to exchange rates and interest rates. “Last year, the exchange rate affected us a lot. These tariffs are much more. I lost about 30%.”
Both auto executives and fruit exporters remain cautiously optimistic. “I think we’ll be fine,” Urquiza said.
But this time, Mexican lawyer Luis Manuel Pérez de Acha warned that Mexico might misjudge the situation. “We need Trump to sign USMCA out,” he said, referring to the trilateral trade agreement between the United States, Mexico and Canada that Trump renegotiated in his first term.
“This could suffocate Mexico’s economy,” he said. He said about 80% of Mexico’s exports go to the United States.
uk
sarah butler
The last time Trump took office, London’s Savile Row was targeted by his administration’s tariffs.
In October 2019, all bespoke suits sold from the UK to the US were slapped with a 25% tax. This is part of a list of products targeted by the EU’s retaliation obligations for subsidizing airplane maker Airbus. The tariffs were in effect until 2021. This culminated in the covid pandemic. As a result, Taylor and many other companies suffered from many other problems.
The Huntsman, a Savile Row tailor founded in 1879 and the inspiration for the Kingsman films, had outlets in New York and London and chose not to pass on the cost of its obligations to clients.
According to Taj Phull, the company’s managing director, sales did not decline. “We had to absorb that, so it didn’t translate to our customers,” he said. “It affected New York’s operating income.”
The business was partially protected by the ease of travel between New York and London before the pandemic. US visitors to the UK will be able to claim VAT on goods they take home and “customers wanted a Savile Row shopping experience”, Mr Phull said. .
“We are a destination and not an impulse buy when you need a suit,” he added. “It’s a thought process for many of our customers, whether it’s an ambitious product that someone saved or a long-time customer.”
But in 2019, sales to the U.S. accounted for only about a quarter of Taylor’s business. Currently they account for something like 40%, so such tariffs will have more of an impact.
Nevertheless, Phull is hopeful that the industry will not be targeted by Trump for future tariff hits. “When the Airbus tariffs came out, it was strange,” he said. “And I don’t think it ever grew up again.”
Canada
leyland secco
For months, Trump has been going after Canada with tariff threats. “You can always become a nation,” he said during an appearance on Davos last week.
Canadian businesses that rely on U.S. exports have put in place contingency measures. One owner told the Guardian that his company, which ships pet products to the US, was likely to incorrectly mark the cost of production. This allows you to pay lower taxes based on lower value materials, rather than being forced to raise prices.
“I’m running the numbers, but I can’t hit them,” the owner said. “Is it a risk? Absolutely. But we’re backed by our corner here.”
The threat of tariffs competed with Canadian politicians for business. Much of the country’s trade is tied to the United States, and exporters worry that tariffs will hurt potential customers.
A recent study from the Canadian Federation of Independent Business found that 65 per cent of small businesses in the country will be forced to raise prices to offset the impact of trade levies. A new reality that industry groups called “disastrous.”
In a sector where raising prices can be devastating to business margins, some people are looking to cut corners, sometimes illegally, to avoid the worst of the tariff pain.
