Impact of Proposed US Tariffs on Exports: Ifo Institute Analysis

The Ifo Institute has released an analysis indicating that the proposed tariffs by former US President Donald Trump could significantly harm American exports. The institute's findings reveal that if Canada, Mexico, and China respond with comparable countermeasures, US exports could potentially decline by up to 22 percent.

Canada and Mexico, crucial trading partners of the US, hold nearly 30 percent of the total trade volume. The geographical proximity of these nations makes them particularly vulnerable to the repercussions of such tariffs, according to Lisandra Flach, head of the Ifo Center for International Economics. In contrast, China may see comparatively less impact due to its ability to redirect trade more easily.

Currently, Trump has postponed the implementation of a 25 percent tariff on goods from Mexico and Canada for 30 days. However, the additional 10 percent tariffs on imports from China have already come into effect. The Ifo Institute evaluated the potential impacts of these tariffs under two scenarios: one without any countermeasures and another with equivalent retaliatory measures.

In the absence of counteractions from Mexico, China, and Canada, the institute forecasts a 14 percent decline in US exports. If the countries respond with matching tariffs, the decline could escalate to 22 percent. The analysis also suggests that Germany, as the fourth-largest trading partner of the US, might see a slight increase in exports; however, this scenario appears less likely given the current climate of tariff threats, including potential tariffs on EU imports.

As the situation develops, the implications of these trade policies could extend beyond immediate economic impacts, potentially reshaping international trade relationships and the global economic landscape.