There are far too many tariff headlines. At one moment, the tariffs are being lifted. At another, the tariffs are being increased. Sometimes, the headlines coincide. But there are many, many issues that are being overlooked as traders attempt to figure out what comes next. One of the most important overlooked factors is simply “does retaliation matter for the US?” And – if so – where does it matter and for whom?
Because the US does not export all things to all countries. It is a far more nuanced situation than many would suggest. The US has become a rather large exporter of minerals, and minerals are simply a way of allocating oil and gas. That spike in 2022 is LNG to Europe and other destinations. The subsequent decline? Prices went down. Nothing too complex there. When it comes to everything else, the lack of growth could be construed as the primary culprit. The US was growing nicely. But everywhere else was lagging.
This is one of the more pertinent charts to the current market environment. The US is not exactly a prolific producer of steel for export. But Nippon Steel is intent on purchasing US Steel and its production facilities in the US. That brings up the question “why?” On the surface, there is little reason to want to purchase a company that has struggled. Nippon does not see it that way. In a presentation following its initial offer, Nippon cited US demographics and cheap energy as reasons for the buy. The thesis has not changed. If anything, the thesis is now even more pertinent.
The US is also not exactly a small player in the trade game either. The US exports more than $3 trillion in goods and services. That makes for plenty of targets when it comes to retaliation. Granted, it is a relatively small percent of the US economy. But that is a bit superficial.
The problem is that nothing in the raw data being cited captures the US’ profits from global businesses. Whether it be Starbucks or McDonald’s, there are many US companies that do not “export” a product. But they are likely to get caught up in everything going on without direct exposure. Yes. The US does not have a balanced trade relationship with many countries. But the US is also a large exporter (see the chart above). When it comes to thinking about exporters, it is worth remembering who one of the largest is … the US.