Once again, harsh rhetoric about the alleged practices of trading partners featured prominently during the recent US Presidential election. Based on statements by current and former US officials, this briefing presents evidence from 173 countries of the prevalence of factors that could trigger disputes with the next US Administration. Korea is awarded the maximum of 5 red flags for its “sins”. Four nations including China are awarded 4 red flags and nine customs territories are awarded 3 red flags.
“Unfair trade” is a staple of US Presidential election campaigns. This year’s did not disappoint. Vice President Harris’ website states that she “will not tolerate unfair trade practices from China or any competitor that undermines American workers.” Former President Trump often levels accusations of unfair trade at foreign governments. But will such campaign rhetoric translate into punitive action? If so, against which trading partners?
One way to diminish exposure to hostile American trade measures is to avoid the policies, practices, and market outcomes that attract the ire of US politicians in the first place. The purpose of this briefing is to assess the vulnerability of 173
economies to future US trade action.
Five common US complaints are identified and information gathered on their relevance to each trading partner. Red flags are awarded to those trading partners performing “badly” on pre-set criteria. Foreign officials and analysts can use this information to gauge the prospect of US action and to devise possible mitigation moves.
Identifying these complaints in no way constitutes an endorsement of them. The value in tracking such complaints is that they could trigger investigations into foreign trade practices, could result in restrictive trade measures being applied, and could cause trade tensions in the years ahead. That surely is of interest to trade officials, to companies with commercial operations abroad, and to analysts.
Complaints, complaints
A review of statements made by US trade officials over the past 8 years—that is, during both the Biden and Trump Administrations—highlights the following concerns about foreign trade practices:
• Excessive bilateral trade surpluses with the United States.
• Unwarranted competitiveness gains at the expense of the United States created by, for example, currency devaluations, subsidies, lax regulations, forced labour, and low wages.
• Impaired market access for US exports.
• Applied import tariffs rates far in excess of comparable US levels.
In addition to these specific complaints, concerns about foreign trade practices are inventoried in the United States Trade Representative’s annual National Trade Estimate Report on Foreign Trade Barriers (NTE). Not every trading partner is covered in these reports and the length of a chapter devoted to each trading partner varies considerably—however, more coverage tends to indicate more US trade concerns.
Empirical counterparts were found for the four factors listed above for as many of the US trading partners as possible. The evidence collected is reproduced in this briefing’s Annex Table. Data sources are described at the end of that Table.
Five criteria to assess US trading partners
With respect to bilateral trade surpluses, a customs territory with a trade surplus with the United States exceeding $10 billion was awarded a red flag.
With respect to competitiveness changes, a trading partner was awarded a red flag if it enjoyed a 5 percent or more exchange rate-adjusted cost improvement (relative to the United States) from 2019 to 2023.
With respect to market access impairment for US exporters, a trading partner was awarded a red flag if, in total, more than $10 billion of US exports currently competes in product markets where the Global Trade Alert team has documented policy interventions that favour import-competing firms.
With respect to applied import tariff rates, a trading partner was awarded a red flag if their applied average MFN tariff rate for all goods exceeds by 5 percent that rate currently applied by the United States.
To capture the litany of complaints about foreign trade practices, the last NTE report issued by the Trump Administration was consulted.1 A total of 57 of the 173 trading partners considered here had chapters covering their commercial policies and
practices in that report. The maximum number of pages devoted to any one trading partner was 46, in this case for the European Union. Trading partners found to have more than 6 pages devoted to their practices were issued a red flag.
Four of the criteria used, therefore, were quantitative in nature and one is partially quantitative (page numbers) but substantively qualitative. Following the evidence-based approach taken here, together these criteria allow for a less subjective assessment than is often presented.
Competitiveness and tariff concerns loom large
Table 1 tallies up the number of red flags awarded under each criterion. Despite the attention given by Trump Administration officials and by the former President to bilateral trade deficits, this is not the most frequently met criterion. Nearly three times as many US trading partners were awarded red flags on competitiveness grounds2
than on concerns about the size of their bilateral trade deficits (62 versus 21 red flags).
In addition, average import tariff rates 5% or more higher than current US levels were flagged 59 times. Yet, market access concerns based on the amount of US exports facing harmful foreign unilateral trade policies was flagged “only” 26 times. The latter finding may reflect the fact that much unilateralism is “below the radar” screen.
In sum, US trading partners are more likely to fall foul of traditional competitiveness and import tariff concerns.
Trading partners at greater risk
Figure 1 reveals which trading partners have been awarded three, four, or five flags. Republic of Korea is the only trading partner awarded 5 red flags. Korean trade practices were the target of much criticism during Trump Administration and should the former President be re-elected, then this may not bode well for bilateral trade relations.
Large emerging markets (Brazil, China, India, Indonesia) have garnered three or four red flags, indicating their vulnerability to US investigations into unfair trade practices in the years ahead. Interestingly, mid-sized emerging markets such as Kenya, Malaysia and Thailand may be caught in the net as well.
Japan and the European Union can expect scrutiny too. And US neighbours Canada and Mexico will be subject to a review of USMCA in 2026.
Concluding remarks
The goal here was not to predict the future course of bilateral trade disputes initiated by the United States, nor US trade policy in general. Rather, it is to inform deliberation by trading partners of the United States on the risk that their current commercial policy posture induces unilateral action by Washington, DC. In turn, this may inform assessments of likely bilateral trade tensions with the incoming U.S. Administration.
On the evidence marshalled here, fourteen trading partners (twelve if EU Member States are taken as covered by the EU) are at risk because the policies and market outcomes attributed to them triggered three or more red flags.
That those trading partners hail from different regions, have different economic systems, and enjoy vastly different levels of per capita incomes defies simplistic characterisation of the typical rogue trading partner. It might also help account
for a sense of grievance on the part of some US officials and analysts that the current world trading system is flawed or inherently stacked against the United States.
1732189169277_ZG_Briefing_40.01
To read the full briefing PDF, click here.