Making America great again with tariffs may be bad news for Asia
Hong Kong
CNN
—
President-elect Donald Trump took to social media on Monday to promise massive hikes in tariffs on goods coming from Mexico, Canada and China starting on the first day of his second term. He had already vowed on the campaign trail to impose new tariffs on all imported goods, altering the relationship the United States has with its biggest trading partners, particularly in Asia, and potentially causing ripple effects on their economies.
Although the potential consequences are uncertain, the tariffs, which are a tax on goods that are imported, will likely hurt countries in Asia that rely on sales to the United States to boost their economies.
Last year, Japan's exports to the US amounted to $145 billion, about 20% of its total. In 2023, the US was South Korea's second-largest export market after China, with $116 billion of goods traded.
But Trump's planned tariffs on Chinese goods could also benefit some countries in Southeast Asia as factories may relocate from China to other places in the region.
Shoe seller Steve Madden announced earlier this month that it will halve its Chinese production to avoid Trump's tariffs, and it will be sourcing from Cambodia, Vietnam, Mexico and Brazil, among other countries.
In 2023, the US was the number one recipient of exports from China, Vietnam, Thailand, India and Japan. The US was also the second-biggest recipient of goods from South Korea and Indonesia, just behind China, and it ranked third for Malaysia and Singapore.
The US imported the most overall from Mexico in 2023, followed by China and Canada. Six of the top 10 places where the US gets its goods are in Asia.
But the flow of goods is not reciprocal as the US has a trade deficit with many Asian nations, meaning that the US imports more from those countries than it exports to them. In the first nine months of 2024, the United States' largest trade deficit was with China. Mexico was second and Vietnam took the third position as the US recorded a deficit of $90.6 billion with the Southeast Asian country. Japan and South Korea also ranked in the top 10.
Although the trade deficit with China has narrowed over the past year, deficits with countries like Vietnam and Thailand are increasing, as the US tries to move away from importing Chinese goods.
Trump says he wants to increase tariffs on all imports to shrink or eliminate the trade deficit, but economists warn his tariffs will effectively be a tax paid by Americans, driving prices up at home as companies pass on the increased cost of imports to consumers.
"If we get tariffs, we will pass those tariff costs back to the consumer," said Philip Daniele, CEO of AutoZone, on an earnings call in September.
