Economies that could be hit hard by a Trump election

Major US trading partners such as China, Mexico, and the EU are expected to suffer a lot of damage due to Donald Trump's protectionist policies.

On the afternoon of November 6, Republican candidate Donald Trump defeated Democratic rival Kamala Harris to win the US presidential election. The election is closely watched by the world, as the candidates' proposals are expected to have a major impact on both the US and global economies. Trump's plan would almost completely reverse the policies of the current administration.

According to analysts, below are the economies that will be most affected when Mr. Trump is elected.

China

Electric vehicles prepared for export at Taicang International Port in Suzhou, Jiangsu province on May 9. Photo: Reuters

Observers say China is now America’s biggest economic rival. The rivalry between the two countries shows no signs of abating, regardless of who becomes the next US President.

However, while Ms. Harris has not proposed changing the current policy of imposing targeted import tariffs, Mr. Trump wants to impose tariffs on all products entering the U.S. During the election campaign, he proposed imposing a 10-20% tax on imports from other countries, with China alone charging 60%.

In 2018, Donald Trump launched a trade war with China, imposing import tariffs of up to 25% on $350 billion worth of Chinese goods, including solar panels, washing machines, steel and aluminum. Beijing retaliated with similar measures.

The trade tensions have taken a toll on the world’s second-largest economy, but the impact has been short-lived. China’s exports have rebounded sharply during the pandemic as locked-down Western consumers have bought more electronics and appliances. Chinese exporters have also found new customers over the past few years, thanks to government support and low prices.

However, with Trump claiming victory, the second round of this war is expected to be more fierce. Every year, China sells more than $400 billion worth of goods to the US. The proposed 60% tariff will cause more damage to this country than before.

Beyond trade, China’s tech industry will also be under pressure. Tech executives say Trump’s unpredictable style could complicate the industry’s outlook.

He is likely to impose more export controls and sanctions on China’s semiconductor industry. During his last term, Trump imposed tariffs on billions of dollars of Chinese technology goods and punished Chinese tech giants like chipmaker SMIC and telecoms giant Huawei.

Patrick Zweifel, chief economist at Pictet Asset Management, estimates that if import tariffs on all Chinese goods were raised to 60%, China's growth could fall another 1.4% to 3.4% next year.

UBS predicts that Trump's tariffs will reduce China's growth by 2.5% in the 12 months after they are imposed, but the reduction will only be 1.5% if Beijing retaliates.

Still, Tong Zhao, a senior fellow at the Carnegie Endowment for International Peace, said Trump's election victory "is not entirely unexpected for China." He told Reuters that China could respond by accelerating its economic and technological self-reliance and strengthening economic ties with countries like Russia.

European Union (EU)

Employees at the Volkswagen factory in Wolfsburg (Germany). Photo: Reuters

Figures from the European Union's statistical office (Eurostat) show that last year, the US was the largest export market for EU goods. Bilateral trade in goods and services is worth about $1 trillion a year.

During his first term, Trump imposed 10% and 25% tariffs on aluminum and steel imports into the US, citing national security. Now, if the US increases tariffs to 10% on all goods, the European economy could suffer a major shock.

According to ABN AMRO Bank (Netherlands), the damage to the eurozone's GDP will be similar to the energy crisis after the Russia-Ukraine war broke out in 2022. A report by the IW Economic Institute (Germany) shows that if Trump imposes a 20% import tax on goods from the EU and the bloc also imposes retaliatory tariffs, the eurozone's GDP is expected to decrease by 1.3% in 2027 and 2028.

Industries such as machinery, cars and chemicals would also be hurt by higher tariffs on imports to the US, as these products accounted for 68% of EU exports to the US last year. Germany, Europe’s economic powerhouse, would be the country most affected, as these products are mainly produced by its companies.

Goldman Sachs predicts that Trump's tax policy is likely to increase inflation in the US, forcing the Federal Reserve (Fed) to raise interest rates. This will push the USD up, causing the euro to weaken.

If the US imposes a 10% tariff on all imports, and a 20% tariff on Chinese goods, and reduces domestic tariffs, the euro will fall by 8-10% against the US dollar. If Trump only increases tariffs on Chinese goods, the euro will depreciate by about 3%.

Mexico

The Mexican peso has been steadily depreciating against the US dollar over the past six months. Chart: Reuters

The Mexican peso fell 3% on the afternoon of November 6 after Mr. Trump declared his victory. Currently, each USD is worth 20.8 pesos. This is the lowest level of the Mexican currency since August 2022.

The US neighbor is expected to face major trade barriers under Trump. Chris Turner, head of markets at ING, said 2025 would be a “tough year for the peso” if Trump reconsiders extending the US-Mexico-Canada Agreement (USMCA) during its 2026 review. The agreement is set to take effect in 2020.

During a campaign rally in Wisconsin on October 6, Trump threatened to impose import tariffs of up to 200% on cars from Mexico to support the domestic auto industry. Many companies currently produce low-cost, small-sized models in Mexico, which helps them make better profits. Last year, Mexico exported 3 million cars to the US, half of which were from three companies: GM, Ford and Stellantis.

Earlier this week, Trump also announced that he would impose import tariffs of 25-100% on products from Mexico unless the country closed its border with the US to curb immigration. Kim Clausing, a researcher at the Peterson Institute for International Economics, said that last year, the US imported $476 billion worth of goods from Mexico. Currently, Washington imposes very few import tariffs on its neighbor.