US trade protectionism likely to rise based on election outcome

August 30, 2024 (MLN): The outcome of November’s US elections could result in a renewed surge in US trade protectionism, Fitch Ratings says.

Details of US trade patterns highlight those economies and sectors that would be most vulnerable to blanket increases in US protectionist measures, as presented in Fitch’s presentation published today.

The US overall goods trade deficit averaged $1.1 trillion in 2022-2023; the trade deficit with China has narrowed since 2018, but this has been offset by widening deficits with other countries or regions.

Looking at the evolution of trade shares by country, China’s share of US imports peaked in 2018, and has since declined. As supply chains have diversified, other countries’ share of US imports has risen (e.g. Mexico, Vietnam).

The US’s top 10 trading partners account for about 70% of all goods imports, measured by value. Mexico, China and Canada are by far the largest of these countries and account for more than 40% of US imports.

In terms of the share of exports, Mexico and Canada stand out – the US accounts for around four-fifths of all goods exports; in GDP terms, exports to the US account for more than 20% in Mexico, Canada, and Vietnam; China’s export/GDP ratio is much smaller at 3%.

Chinese machinery/electrical equipment accounts for almost half of US imports, of which computers and phones make up about a fifth.

The import range from the EU is more varied, with machinery accounting for 22% of imports, while pharmaceuticals cover almost one-fifth (with other chemicals/plastics one-eighth), and vehicles about 13%.

The import mix from Canada reflects the important role of energy, with crude oil accounting for one-fifth, while cars (and parts) comprise 11%.

Machinery/electrical equipment and vehicles together account for more than 60% of imports from Mexico; while cars (and parts) are about 17%.

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