USA firms brace for major hit by retaliation tariffsBy Bouchard Fintech
The likelihood that that USA would be imposing tariffs on China was clear for all to see. After all, China has a massive trade imbalance with the USA and exports far more products and goods to the USA than it imports.
It was, however, something of huge surprise that the USA started to impose tariffs on imports from its closest allies and most trusted trading partners. The tariffs make even less sense when considering that some of the countries that the tariffs have been imposed on actually have a trade deficit with the USA. Yes, you read that correctly, it is the USA that has a trade surplus with some of the very countries that it is imposing tariffs on!
Given the above facts, it is not so surprising that many of the countries that the USA has imposed tariffs on are now retaliating with their own tariffs on USA made products and goods.
A striking example of how things can go wrong in the corporate world when tariffs are imposed haphazardly is with famed motorcycle icon Harley-Davidson. In the early days of the new administration, Harley-Davidson appeared to be the poster child for what a great American company is and what an amazing story of American manufacturing might.
However, when steel and aluminum imports were hit with import duties, Harley-Davidson was one of the first American manufacturers to be impacted. After all, some of the steel and aluminum used in making those bikes are imported from places like Canada. These tariffs raise the costs on motorcycle manufacturing and, effectively, make those Harley-Davidson bikes more expensive to make and, therefore, less price-competitive.
To make matters worse, many of the countries that have been hit with tariffs from the USA are now retaliating. Not surprisingly, many of those retaliatory tariffs target American iconic products including Harley-Davidson. With the European union imposing its own tariffs on Harley-Davidson that company has had to announce that it is slowing down production in the USA. Harley-Davidson has announced that it is ramping up its motorcycle production in other parts of the world.
Countries that have been hit by American tariffs are acting very strategically in where they target their own tariffs against the USA. Interestingly, Harley-Davidson is actually based in the home state of the Speaker of the United States House of Representatives. So, by targeting them, they are sending the Speaker a not-so-subtle message.
The research team at Bouchard Fintech has noted many other similar issues. Those tariffs are hitting key Republican states in order to put pressure on their representatives. That is why it is notable that Kentucky bourbon is being targeted since it is the home state of the Senate Majority Leader.
A noted example is soybean. The humble soybean is actually one of Americas' greatest farming exports. That is why it is so significant to note that soybean exports to China are already down by some 20 percent, so far, this year alone.
Then there is concern for pork exports from the USA. Mexico has confirmed that it plans its own retaliatory tariffs and that those tariffs will include American pork. Similar tariffs are being imposed on other products and goods coming from the USA.
It should be clear to see that the tariffs imposed by the USA hurt exporters in other countries. It is also clear that when those other countries retaliate against the USA, then it is American exporters that end up being financially hurt.
Last but not least, Bouchard Fintech experts want to point out that ultimately it is the consumers, both in the USA and in the retaliatory countries that will pay heavily for these tariffs. After all, the tariffs drive up costs of food, products and goods. Those same tariffs also reduce demand and end up costing workers wallets, income and even their jobs.
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