Supply Chain Q&A: Living with change
With COVID-19 and fallout from the US-China trade war, global supply chain managers have had much on their plates recently. Next up: coping with climate change and integrating Africa, says Mark Slade,...
Competitiveness
Taking proactive steps to guard against loss of US markets
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
More to explore
Share
Three lessons in impact investment to absorb from Peruvian moss
Driving sustainable economic development through impact investing requires careful due diligence, strong partnerships and patient capital. The elea Foundation’s experience with Peruvian startup Inka Moss offers valuable lessons when it comes to...
Solutions to ‘dirty’ bitcoin’s growing sustainability challenge
Sustainability Solutions to ‘dirty’ bitcoin’s growing sustainability challenge by Salvatore Cantale, Fiorenzo Manganiello Published December 3, 2021 in Sustainability • 5 min read DownloadSave Cryptocurrencies, the environmental bogeyman, could be a force of...
Opting out of Black Friday and Cyber Monday: Why businesses are fighting consumerism
Do consumer incentives have negative consequences on people and planet? Julia Binder, Professor of Sustainable Innovation and Business Transformation at IMD, explores the risks....
The Olympics jumps the first hurdles in race to be sustainable
November 16, 2021 • by Michelle Lemaître in Sustainability • 7 min read
Among the triumphs of the 2020 Tokyo Games were a few firsts that offer lessons in sustainable leadership...