Trump’s Tariffs: Who Will Pay the Highest Price and Which Countries Will Feel the Impact the Most?

It is already clear to everyone that U.S. President Donald Trump has a peculiar love affair with tariffs, as not a day goes by without Trump targeting some country for new tariffs. After first announcing and then postponing tariffs on Canada and Mexico, he imposed an additional 10 percent tariff on Chinese goods and threatened the European Union. All this comes at a time when the U.S. is recording a significant trade deficit, which was over $1.2 trillion in goods in 2024, while a surplus of nearly $300 billion was recorded in the services sector.

25 percent on steel and aluminum

The latest official tariffs relate to imports of steel and aluminum and amount to 25 percent. Trump signed decisions raising the tariff rate on aluminum imports to 25 percent from the previous 10 percent he introduced in 2018 to assist the struggling sector. This reintroduces tariffs of 25 percent on millions of tons of steel and aluminum that were imported into the U.S. duty-free under quota agreements, exemptions, and exclusions of thousands of products.

This announcement caused a drop in stock markets but also spurred a rise in gold prices. However, this move further unsettled global economic relations and increased fears of a trade war. Futures prices for stocks fell, gold reached a new high, and the euro weakened against the dollar after the new tariffs took effect during the Asian session on Tuesday.

The European Union immediately reacted by announcing countermeasures if the U.S. does not withdraw tariffs on steel and aluminum. Germany is one of the main exporters of steel to the U.S., and during Trump’s first term, the EU also retaliated with tariffs worth €2.8 billion on American products.

– Unjustified tariffs for the EU will not go unanswered – they will trigger strong and proportional countermeasures – was the first reaction from the European Commission.

The Commission President expressed deep regret over this decision, emphasizing that tariffs are taxes that are bad for business and even worse for consumers.

– The European Union will act to protect its economic interests. We will protect our workers, companies, and consumers – said von der Leyen.

Effective from March

Trump’s executive order on tariffs of 25 percent on steel and aluminum imports takes effect on March 4. These broadly applied tariffs apply to all U.S. trading partners, including Mexico and Canada, which are among the largest suppliers of these metals.

– Essentially, we are imposing a 25 percent tariff without exception on all aluminum and steel, which will mean the opening of new factories in the U.S. – said Trump. However, he indicated that Australia might receive an exemption due to purchasing American aircraft.

According to analysts at Morgan Stanley, as much as 80 percent of U.S. demand for aluminum comes from imports, with Canada supplying 70 percent of those deliveries. Major exporters to the U.S. market also include the United Arab Emirates and China.

Markets Under Pressure

Following Trump’s decision, market sentiment weakened. During the Asian session on Tuesday, stock exchanges fell across the region, while European and American futures stocks also indicated a negative trend. The German DAX, which reached a record value the day before, could face selling pressure. The rise in uncertainty has spurred increased demand for safe investments like gold, which reached a price of $2,940 (€2,853) before a slight drop to $2,917 (€2,831). The Canadian dollar and Mexican peso weakened by nearly 0.2 percent against the U.S. dollar, while the euro fell below the level of $1.03, marking its lowest exchange rate in the past week.

Despite the fluctuations, market volatility is not as pronounced as when Trump announced tariffs on Canada, Mexico, and China last month. However, investors are concerned about potential countermeasures from other countries, which could lead to a broader trade conflict and worsen global economic prospects.

– The main concern is the potential escalation of the trade war, which could have far-reaching economic consequences. This keeps investors on edge – said Kyle Rodd, senior market analyst at Capital.com Australia.

Which Countries Export the Most Goods to the U.S.?

In 2024, the U.S. imported the most goods from Mexico, China, and Canada, with each of these countries delivering over $400 billion worth of goods. Mexico and Canada are among the largest exporters of vehicles, energy, and oil to the U.S., while a significant portion of Mexican exports also consists of electronic equipment and machinery. Chinese exports to the U.S. include electronics, machinery, and agricultural products.

Other major exporters to the U.S. include European and Asian countries such as Germany, Japan, South Korea, and Vietnam, with total exports exceeding $100 billion annually. The United Kingdom exported goods worth $68 billion to the U.S. during the same period.

The U.S. has the largest trade deficit in the world, exceeding $1 trillion, and some countries export more to the U.S. than they import from it, making them primary targets of Trump’s tariff measures.

According to data from the U.S. International Trade Administration, the largest trade deficit the U.S. has is with China ($296 billion) and Mexico ($172 billion), making these countries the first to be affected by tariff threats. Next on the list is Vietnam, which is becoming a key entry point for Chinese companies avoiding tariffs, followed by Ireland, Germany, and Taiwan.

Which Sectors Could Be Most Affected?

Canada, one of the first targets of Trump’s tariffs in his second term, primarily exports fossil fuels, automobiles, and machinery (including aircraft turbines and piston engines) to the U.S. Automobiles and machinery are, on the other hand, the largest categories of goods that the U.S. exports to Canada.

Mexico has a significant trade surplus with the U.S., but still imports tens of billions of dollars worth of automobiles, machinery, and electronic components such as microchips and fiber optic cables. However, the main Mexican export product is automobiles and trucks.

Mexico and Canada have enjoyed largely free trade with the U.S. since 1994, when the North American Free Trade Agreement (NAFTA) came into effect, which was replaced in 2020 by the new United States-Mexico-Canada Agreement (USMCA).

Regarding Europe, key European export products to the U.S. include pharmaceuticals, machinery, and automobiles. On the other hand, the U.S. exports oil, pharmaceuticals, and machinery to the EU.

As for China, which has already responded with countermeasures, half of Chinese exports to the U.S. consist of electronic devices, such as computers, phones, and batteries, as well as toys, while the U.S. exports microchips, oil, and soybeans to China. Trade between the U.S. and China is declining; in 2018, 21 percent of U.S. imports came from China, and that share decreased to 14 percent by 2023.

Which Countries Are Most Exposed?

Looking at the share of individual countries in exports to the U.S., it can be assessed how much their economies could be affected by tariffs. For Canada and Mexico, the U.S. represents a key market – 80 percent of Mexican and 78 percent of Canadian exports go to the U.S. The EU, China, and the UK are less exposed, with shares of 19, 15, and 14 percent, respectively.

Within the EU, Germany leads with $160 billion in exports to the U.S. in 2024, which is 10 percent of its total exports. Ireland, on the other hand, exports more than a quarter of its products to the U.S.

However, due to global supply chains, even countries that are not directly affected by tariffs could feel the consequences. If, for example, Germany were to be hit by tariffs while the UK is not, British companies producing parts for German products could still feel the impact. However, for now, the UK is not under direct threat of tariffs, one reason being a balanced trade relationship with the U.S. U.S. data shows that the U.S. had a surplus of $10 billion in goods trade with the UK in 2023, while British data suggests that the UK had a small surplus in goods but an overall surplus in goods and services of £71.4 billion.