President-elect Trump has suggested withdrawing from the North American Free Trade Agreement (NAFTA) and ending negotiations over the Trans-Pacific Partnership (TPP), albeit there is considerable uncertainty over what he will, or even can, do.
If one of the main consequences of the election of Donald Trump is US protectionism, it’s worth considering who stands to lose the most. We have considered countries’ exports to the US as a percentage of their GDP, in the belief that countries that trade most with the US would almost certainly be hurt the most.
As the gravity model of trade would imply, countries that are largest and closest to the US are most reliant on trade with it. Mexican exports to the US are considerable, and the role of NAFTA for increasing trade after 1994 is notable.
The Canadian economy comes second, but looks less reliant on exports to the US compared to 15 years ago. In fact, Canadian exports to the US now represent around 19 per cent of Canadian GDP, but its net exports to the US represent only 3.2 per cent of Canadian GDP.
Ireland, which exports predominantly healthcare and chemical products to the US, in addition to being highly exposed to potential US tax changes, also looks to be at risk.
Conversely, most of the market concern regarding US protectionism seems focused on China. While China is the biggest exporter to the US in total trade terms, the reality is that China’s economy in the past decade has transformed from one that was export reliant to one that is now largely led by domestic investment. Chinese exports to the US now account for only 4.4 per cent of Chinese GDP, versus almost 11.5 per cent in 2005.
If the US does resort to protectionism, it is very unlikely to be alone. Protectionism globally is most damaging to the GDP of countries whose economies are the most open, and probably more damaging to those economies that export more than they import. Large export-reliant economies that would therefore be most hurt by a rise in global protectionism include Germany, Saudi Arabia and South Korea. Meanwhile, large economies that would be much less affected include Brazil, Japan and the US.
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