In fact, big businesses support Trump's plan to cut corporate taxes. More importantly, few of the American corporate houses like the idea of Trump protecting them by imposing tariffs, especially on Chinese goods. On economic front the US accuses China of unfair trade practices related to forced technology transfers and intellectual property theft. The business elites are supported by the political elites who are concerned that China is leveraging its newfound dominance in electronic exports for espionage, prompting the US to place leading Chinese firms like Huawei, ZTE Tech, on its trade restriction list in 2019. The China bashing initiated during Trump’s presidency continued, with the US criticizing China for human rights abuses in Xinjiang, the draconian security law in Hong Kong, its handling of COVID-19, and even taking steps to ban the social media app TikTok. The US now trades more goods and services with the European Union, Canada, and Mexico than it does with China.

With Trump winning, harsher economic and political sanctions are likely on the horizon. Basic economic theory states that while the government generates revenue by imposing tariffs, it is the domestic consumers who ultimately bear the burden of those tariffs. A new paper from the Peterson Institute for International Economics finds that presidential candidate Trump’s proposed 10% across-the-board tariffs and 60% tariff on imports from China would cost the average American household around $1,700 a year. These tariffs could lead to increased prices for consumer goods, making it challenging for the Fed to meet its inflation target of 2%.

Contrary to the popular rhetoric surrounding job creation, higher tariffs actually have a negative impact on domestic employment and income. A study finds that job losses from trade retaliation surpass job gains from tariff protection. In 2019, the US exports to China supported 1.2 million jobs, while 197,000 people were employed by Chinese multinationals—both affected by tariff escalation. Another related study pointed out, the job losses due to cheap imports is significantly less than the benefits to the US consumers in terms of lower price and income generation. While consumers enjoyed lower prices and a 13-percentage point increase in incomes, the negative impact on account of job loss is only 1-percentage point.

What policymakers fail to understand is that in the age of globalization, trade has become increasingly fungible. To avoid US tariffs, the Chinese manufacturers are now using Mexico as a backdoor. For the first time in two decades, Mexico has overtaken China as the largest exporter of goods to the US. In 2023, Mexican goods imported to the US totalled $475 billion, approximately $20 billion more than in 2022. During the same period, Chinese goods imports to the US amounted to $427 billion, about $10 billion less than the previous year. An estimated $3.7 billion Chinese FDI flow came to Mexico in 2023, which is significantly higher with an average flow of $1.3 billion during the previous decade.

Chinese companies are relocating their raw materials and manufacturing to Mexico to capitalize on the nearshoring trend, as Mexico is a partner country in the United States-Mexico-Canada Agreement (USMCA), formerly known as NAFTA. At least 30 Chinese firms now operate out of Mexico. For example, Chinese car manufacturers BYD and Chery International are establishing operations in the country. Container traffic from China to Mexico has surged in recent years, with a 22% increase in 2024 compared to the previous year. In 2023, the increase was even more pronounced, at 33% over 2022. 2022 and 2023 also marked the highest volumes of exports from Mexico to the US. To take advantage of increasing volume of US-Mexico trade, freights companies like Uber Freights, Maersk Line, and DHL are setting up logistic and warehouse facilities on both side of the Mexico-US borders.

Therefore, Trump cannot safeguard the US economy solely through harsh rhetoric toward China. On the contrary, now that Trump has won theelection, the world is likely to become more bipolar, with China poised to gain economically. Protectionism and jingoism are likely to divert investment into a wasteful war economy, rather than towards more productive activities like addressing climate change. According to Australia’s Lowy Institute, in 2001, the year China joined the World Trade Organization, over 80% of countries with available data had a larger volume of trade with the US than with China.

By 2018, that figure had decreased to just over 30%, with two-thirds of countries (128 out of 190) trading more with China than with the US.Over the last decade China has spent more than a trillion dollar in over 140 countries on infrastructure investment, thereby building an economic relationship. High-speed railways in Indonesia, ports in Pakistan and Sri Lanka, bridges in Zambia, and intercontinental highways in Central Asia are all examples of how China is increasingly strengthening its economic and financial ties around the world. A more protectionist strategy from Trump will only further alienate the US and its economy. (IPA Service)