ITIF Says Mexico, Thailand Most at Risk for Trump Tariffs
Running a large trade surplus with the U.S. is only one way to draw President-elect Donald Trump's tariff fire, argues a new report from the Information Technology and Innovation Foundation; other ways would be by expecting the U.S. to provide a defense umbrella, enacting digital services taxes or other anti-U.S. regulations, and taking what ITIF called "soft positions toward China."
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The paper, released Dec. 9, said Mexico and Thailand are the most at risk for facing tariffs, given the size of their trade surpluses with the U.S., compared with their economies, and their scant defense spending.
ITIF projected that Poland, Estonia, Latvia, Lithuania and Australia are least likely to face tariffs. However, that assessment ignored that all the European countries are part of the EU, so if Trump decides to hike tariffs on the EU, they will be affected. Australia was the only country in the world initially spared the Section 232 tariffs.
The paper was sympathetic to Trump's anger over free-riding in defense, and the argument that Japan and China have used mercantilism to grow their manufacturing prowess and undermine the U.S. industrial base. "All too often, U.S. policymakers continue to trade U.S. economic interest for global foreign policy concerns because, just like the rich person who can afford to be altruistic, the U.S. establishment thinks America’s economic position is so secure that it can afford to make concession after concession," the paper said.
The paper said for Mexico and Thailand to improve their standing, they should pass "laws limiting inward foreign investment from China," share intelligence on Chinese efforts to steal intellectual property or other cyber espionage, stand up to China's aggressive diplomacy, and join U.S. export control initiatives.
The authors said that reducing their trade deficits with the U.S. is harder, "because trade balances are the product of many factors, and the private sector plays a key role." But, they wrote, the countries at risk should ensure their tariffs on U.S. imports are equivalent to U.S. tariffs. For Mexico, that's already the case because most U.S. goods faced no tariffs under NAFTA and its successor.
"They can encourage their companies to buy more from American companies and less from Chinese companies. To the extent that nations subsidize exports, they can cease doing so. And to the extent they manipulate their currencies for competitive advantage, they can stop," they wrote.