Tariff Leverage and Sensitive Countries

As we read every day about tariffs, threats and negotiations, I thought it’d be interesting to take a very quick look at what countries are most sensitive to US tariff/trade threats.

Special thanks to my Quinnipiac Global Economics Research Team who ran some quick code to collect and organize this data for me, especially Ryan Slattery, Daniel Hogan and Isha Kahn. Thank you!

Honestly, I thought someone would have taken a minute and done this by now, but they haven’t so, here it goes.

The table below uses data from the US Federal Reserve Bank of St. Louis’s data base (FRED) to get imports to the United States by country. We matched that with GDP for these same countries from the World Bank data base.

Keep in mind that these are quick, “back-of-the-envelope” calculations. We tried to keep the years the same and ensure we were using similarly measured nominal values for both the import measure and the domestic GDP measure. But, this isn’t a scientific report. I’m not concerned that the numbers are exact, but they are all in the ballpark, so to say, and the relative magnitudes are accurate and relevant.

With that caveat, the idea is to take the total amount the country exports to the USA (i.e., “USA imports from country X” in FRED) and see how important that is for their local economy overall. Hence, we divide exports to the USA by local GDP. The table ranks the country’s by that.

Not surprisingly Mexico and Canada are at the top. (If you want the global list, leave a comment and I can hyper link to the excel file. The globally top country, for example, is actually Guyana, but the list here is focused on more relevant geo-political players…sorry Guyana.)

I highlighted the countries we are currently hearing about in the news. Mexico and Canada are there. Their exports to the USA are about 20% of their GDP. That’s huge! A trade war with the US would cripple their economies. Interestingly, US exports to each country are 17% of Mexico’s GDP and 15% of Canadas, so, also large and relevant, but small as a percent of US GDP (which I didn’t calculate). All the leverage here is on the US’s side, clearly.

Colombia was threatened with tariffs and trade trouble recently, so I highlighted them as well. Colombian exports to the USA are around 5% of their GDP, also significant.

Denmark is under some US pressure these days as well and trade with the USA is important, but only 2-3%. The same is true for Germany and France, somewhere around 2-3%. That’s important, but not life threatening.

A trade war wouldn’t put those to zero, but could lower them. We don’t actually know by how much, so let’s say, by half. That would be about 1% point off of GDP. Currently Germany is in recession with two years of negative growth and France is struggling as well. So, the leverage is there both on these basic economic terms and due to their current precarious situations.

Conclusions

I just wanted to share this so you can look for yourselves. I think it gives some insight into the countries with which the current US administration are most likely to use tariffs for leverage.

China is only 2%, but I do not trust any Chinese data, so take that with a grain of salt. But it’s possible.

Otherwise I think this is a simple and interesting insight into where we might see tariff pressure campaigns and why. Think of it as the US trade/tariff leverage list.

Thanks for reading.