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    Competitiveness

    Taking proactive steps to guard against loss of US markets 

    by Simon J Evenett Published November 6, 2024 in Competitiveness • 5 min read

    A balanced assessment of the past eight years is that, in terms of trade policy, America has turned protectionist, implementing significant measures to restrict domestic market access to foreign (non-US) imports.

    It would be a mistake to associate this inward turn only with Republican politicians; the Biden Administration took various measures in May 2024 to restrict US market access to imports and the new administration post the November 2024 election may accelerate protectionist measures.

    Given that the US imports more than $3tn worth of goods each year, loss of access to the US market would have a significant adverse impact on the top-line revenue of many foreign firms.

    But sectors differ in their exposure to US markets in both absolute and relative terms, so blanket statements about exposure to America’s inward turn are unwise. Using international trade data that leverages the UN method of grouping products into “chapters,” a recent Global Trade Alert briefing analyzes which foreign suppliers are most dependent on US market access and therefore are most vulnerable to further protectionist measures.

    Identifying vulnerable sectors

    A foreign sector is more vulnerable to the loss of access to the US market when:

    • The total value of exports to the US is larger.This identifies the revenue hit if US market access is lost and no further measures are taken.
    • US exports constitute a large share of global cross-border sales.This indicates (very approximately) the size of the market elsewhere for goods previously shipped to the US.
    • Non-US exports in the sector grow slowly (or not at all).This indicates the growth in the size of the alternative export destinations.

    Suppliers to United States – vulnerable industries

    The following suppliers to the US are deemed to be the most vulnerable to high tariff charges or restricted market access:

    • Road vehicles
    • Engines
    • Computer hardware
    • Medical devices

    Suppliers to United States – less vulnerable industries

    By contrast, the following sectors are less exposed to potential tariff increases:

    • Crude oil
    • Pharma products
    • Batteries
    • Telecomms equipment
    • Semiconductors

    Proactive steps

    Growth in non-US product imports

    In eight sectors, growth in imports of non-US products is so weak that full replacement of lost US market sales would, on current trends, not take place until after 2035.

    Geographic sales diversification

    This highlights the importance of penetrating and growing market share in alternative export destinations to hedge against the potential loss of US market access. Geographic sales diversification can help mitigate this trade policy risk.

    Opportunities beyond the US

    Even if the US does not escalate its recent policy of imposing higher import barriers, increased trade policy uncertainty will take its toll on investment, market entry, and sourcing decisions. Fortunately, there are plenty of commercial opportunities beyond US markets.

    Authors

    Simon J Evenett

    Professor of Geopolitics and Strategy

    Simon J. Evenett is Professor of Geopolitics and Strategy at IMD and a leading expert on trade, investment, and global business dynamics. With nearly 30 years of experience, he has advised executives and guided students in navigating significant shifts in the global economy. In 2023, he was appointed Co-Chair of the World Economic Forum’s Global Future Council on Trade and Investment.

    Evenett founded the St Gallen Endowment for Prosperity Through Trade, which oversees key initiatives like the Global Trade Alert and Digital Policy Alert. His research focuses on trade policy, geopolitical rivalry, and industrial policy, with over 250 publications. He has held academic positions at the University of St. Gallen, Oxford University, and Johns Hopkins University.

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