Last year, steel and aluminum imports represented 23% and 50% of domestic consumption, respectively. Trump intends to announce new tariffs on cars, pharmaceutical products, semiconductors, and other goods in the first week of April, once he receives the relevant information to implement reciprocal tariffs, which will also have effects on companies in these sectors. Trump considers these levies essential to reverse the $1.212 trillion trade deficit, which is one of the main indicators he cites to demonstrate that the United States is 'great again.'
The countries with which the United States has the largest surpluses are the Netherlands ($42.783 billion), Hong Kong ($23.710 billion), the United Arab Emirates ($18.230 billion), and Australia ($17.628 billion). It is striking that warnings about the effects of the tariffs Trump intends to impose come from banks, political risk assessors, and think tanks mainly located in Canada, Europe, and Japan. Out of the 233 countries and territories with which the United States had trade relations last year, 105 had a favorable balance, mainly China ($295.402 billion), Mexico ($171.809 billion), Vietnam ($123.463 billion), Ireland ($86.748 billion), and Germany ($84.828 billion).
The United States is the world's largest importer of new cars, where 41% of sales are imported vehicles. Canada had a surplus of $63.336 billion. The possibility of a global recession is considered increasingly viable not only due to the effect that tariffs would have internationally but also because of the uncertainty Trump is generating, which is hindering production and investment plans of companies worldwide. It reduced global trade by 65%, causing many people to lose their farms in that country and reducing the capital invested in the stock market.
It should be remembered that The Economist Intelligence Unit, the Eurasia group, and other organizations specializing in political risk have identified Mexico as the country most vulnerable to Trump's policies. In the memorandum published last week in the Federal Register, where he requests the necessary information to apply tariffs reciprocally, Trump insists that the U.S. trade deficit results from unfair treatment and abusive policies faced by U.S. exporters, ignoring that the balance of trade reflects the structural conditions of any economy and cannot be reversed by decree, as seen in his first term after renegotiating treaties with Canada, Mexico, and South Korea and signing the Phase One deal with China.
Following the announcements of various tariffs on U.S. imports, the number of reports warning of a possible global recession in case they are implemented is growing. Given this scenario, the Mexican government needs to distance itself as much as possible from drug cartels and implement visible and significant actions to reduce perceived risk and attract new investments. In addition to estimates from various think tanks in Washington, the U.S. Congressional Budget Office last year conducted a study that concluded that a general tariff of 10% on products from around the world and 60% on Chinese products would generate an annual decline of 0.6% in the country's GDP, not taking into account the effects of retaliatory measures that other nations may take.
That is why the leaders of the European Union met last week, and other countries - like Canada - for whom the United States is their main trading partner, have started to design alternative policies. The announcement of the 25% tariffs on steel and aluminum has increased the value of shares of U.S. companies producing these materials, while the values of European and Asian companies have fallen. Meanwhile, the Inflation Reduction Act, passed in 2022, offers subsidies and financing for projects that generate new technologies, while the pharmaceutical industry in that country is the largest in the world. The Smoot-Hawley Act imposed a 20% tariff on all industrial imports to the United States between 1930 and 1932, extending the effects of the Great Depression until 1935.
