Economic Impact of Trade Tariffs

Big day for EV and car makers today. 🇨🇳🚨🚗 EU have voted to impose tariffs as high as 45% on Chinese-made EVs by October 31. The move comes after an investigation found that “Chinese-made EVs were distorting the European market.” 👇 So, what’s up? 🚗 The European Commission can now implement the duties that would last up to 5 years. Ten member states voted in favour for the measure, while Germany and four others opposed it, with 12 abstentions. 🚗 It’s said, the EU and China will continue negotiations to find an alternative to the tariffs. They are exploring an agreement to control export prices and volumes instead of imposing duties. 🚗 The new tariff rates for EV manufacturers exporting from China could reach up to 35%. These duties would be added to the current 10% rate. ❗️ Some leaders in the European automotive sector have expressed their opposition to the tariffs, saying that it could backfire. ✅ BMW AG warned that protectionism risks starting a spiral, leading to tariffs, isolation and lost cooperation. China remains a core market for BMW, with 824,932 BMW and MINI vehicles delivered there in 2023. ✅ Similarly, Volkswagen noted that an escalating trade spat between China and the West could fuel inflation. Indeed, in the meantime, Chinese EV makers have been pivoting to the Global South and BRICS. ✔️ LATIN AMERICA In 2023, BYD took over Ford's factory in Bahia, Brazil, after Ford's exit. Chinese BEV exports to Brazil then surged eighteen-fold, making up 92% of Brazil's total BEV imports. ✔️ SOUTHEAST ASIA Southeast Asia's EV market has been expanding, with Chinese companies making significant progress. BYD opened its first factory in Thailand this year, and Xpeng Motors and Geely are investing heavily. EV sales in the region more than doubled in the first quarter of 2024 compared to last year, according to Counterpoint Research. ✔️ AFRICA Neta opened its first African dealership in Kenya this year, and Xpeng began selling two EV models in Egypt. While European and Japanese brands are popular in Africa, they primarily offer gas-powered models, creating opportunities for Chinese companies. Analysts expect new vehicle sales to increase as African economies grow. ✔️ RUSSIA Thanks to Russia, China has overtaken Japan to become the world’s biggest exporter of automobiles and transportation equipment. In 2023, Chinese car exports to Russia rose 594%,  while exports of trucks and tractors rocketed almost 700%. Today 9 out of top 10 new cars sold in Russia are Chinese. What’s your take? 🤓👇 Good move by EU or not? ___ #china #ev #tech #eu Insights via Bloomberg, Benzinga, SCMP, Semafor, Atlantic Council ❗️ Finding value in my content? Send me a message to explore tailored insights for your team.

President Trump's announcement that steel and aluminum tariffs will rise to 50% this week is terrible news for U.S. manufacturing. The reason is simple: steel mills and primary aluminum plants employ a fraction of the people that are employed in downstream industries that use steel and aluminum. One chart below created from the 2022 Economic Census (https://lnkd.in/gmSA3E8F) - you can't access higher frequency data for aluminum employment from the Current Employment Statistics survey. Thoughts: •The left two columns are payrolls at steel mills (NAICS 33111) and primary aluminum (NAICS 331313). Together, these industries employ somewhere between 80-90k people. •The three rightmost columns show payrolls in downstream industries: fabricated metals (NAICS 332), machinery (NAICS 333), and transportation equipment (NACS 336). Those three industries alone account for over 4 million workers employed. •Why do I say this is negative news? Simple: domestic producers will raise their prices of steel and aluminum, which will increase the cost structures of downstream users. We have ample evidence from numerous economics papers that upstream protectionary tariffs reduce total manufacturing jobs by impacting downstream employment. Two examples: Cox (2025): https://lnkd.in/d6CeCaqA Barattieri & Cacciatore (2023): https://lnkd.in/gWgxQjtY Implication: raising steel and aluminum tariffs to 50% is, simply put, horrible economic policy. Domestic producers will raise their prices for these metals, which will inflate cost structures for tens of thousands of plants than employ over 4 million workers (compared with just 80-90k in the protected industries that make steel and primary aluminum). This makes exports of goods containing steel and aluminum less competitive and may be the final straw that encourages EU retaliation. Remember: Canada is our largest source for imported steel and especially aluminum, so arguing this is for national security just doesn't make sense. #supplychain #shipsandshipping #economics #markets #manufacturing #freight

The House Budget Bill explained… for solar and storage manufacturers. This week, as the Senate reconvenes to determine how to move forward with the reconciliation process, I will be sharing explainers like this one for each segment of our industry. We’re starting at the top of the supply chain: manufacturers. There are three provisions in the bill that manufacturers should be aware of: 1. 45X. 45X, the Advanced Manufacturing Production Tax Credit, is a federal incentive for the domestic manufacturing of clean energy components and critical minerals. The House bill accelerates the 45X phase out schedule, sunsetting it in 2031. 2. Transferability. The ability to transfer tax credits, including 45X, helps manufacturers finance big capital expenditures like new factories and machinery. However, the House bill ends transferability for 45X after 2027. This will limit the long-term investments that many domestic manufacturers can make. 3. FEOC. The Foreign Entities of Concern (FEOC) provisions are restrictions on who can claim certain energy tax credits. As currently drafted in the House bill, these restrictions are entirely unworkable. The FEOC restrictions exclude not only companies with foreign ownership but also manufacturers that import components, subcomponents, or critical minerals from specified foreign entities or foreign-influenced entities. The bill even excludes manufactured parts that contain components that are produced under a license from one of these entities. In practice, these rules will exclude virtually every manufacturer from accessing the tax credits. Additionally, if passed by the Senate, many of these restrictions go into place at the end of this year.    Now that you know what the bill says, let’s talk about what it will do.   I’ve spoken at great length about the surge of domestic solar and storage manufacturing in the U.S. and its importance for our technological competitiveness, our national security, and our local economies.   This bill puts that all at risk…. And red states have the most to lose. SEIA estimates that, if the House bill passes the Senate, it will likely force about 331 solar and storage factories to either close or be cancelled. Over $40 billion in manufacturing investments are at risk, with about $35 billion of that coming out of red states.   Because of the other provisions of the House bill that restrict solar deployment, even the factories that do survive will see far less demand for their products. We worked so hard to create a dynamic ecosystem of solar manufacturing and deployment and, right now, it is all at risk.   So, please, keep the pressure up on your Senators: https://lnkd.in/ekJ-QU27   I will be back tomorrow with additional explainers for other solar segments. 

I’m pleased that President Trump has announced a pause on implementing some of the “reciprocal tariffs” that he announced last week.   In the short-term, tariffs can hurt economic activity. They cause costs to rise, and companies will either absorb those costs, decreasing margins, or pass them on, which will affect pricing and demand. So delaying the tariffs will avoid these short-term impacts.   But we remain in a period of high uncertainty, including the near-term rising risk of an escalating trade war with China. This uncertainty will likely dampen global investment and growth. Every investment decision is based on both risk and return. The large uncertainties in the global trading system have substantially increased risks for most companies.   BCG’s trade and geopolitics experts, put it this way: “Every company, regardless of sector or location, needs to build tariffs and the related uncertainty into its planning and operating model.” In other words, core decision making just got a lot more complicated for business leaders. You can read more from our Global Advantage team on navigating the impact of tariffs: https://lnkd.in/ert8gazK Some companies have already built geopolitical muscle, developing capabilities to anticipate and respond to policy shifts. They’ve set up teams to map out tariff impacts, consider pricing strategies, and work with suppliers to share cost burdens. They should be better positioned to confront the current turbulence and headwinds. But even the leaders of those companies are now asking harder, longer-term questions. All businesses need to understand how sustained high tariffs could affect their supply chains and manufacturing networks—and prepare in advance as much as possible.   Trade battles and higher uncertainty are not what most of us would have wished for, but that’s the world we’re in. Leaders must embed a mindset of resilience grounded in adaptiveness and agility and seek advantage and opportunity amid uncertainty.

Today, the European Parliament debates the critical situation of the steel industry, a sector on which many key EU manufacturing value chains rely.    In an open letter, signed by other industry representatives and myself, we urged policymakers to understand that this discussion goes beyond our industry – it concerns the future of Europe’s industrial backbone.   The European steel industry has long been a pillar of innovation, prosperity, and employment, with the potential to take a lead in Europe’s green transformation. Yet, the challenges we face today – skyrocketing energy prices, global overcapacity, and unfair trade practices – are creating a perfect storm.   The numbers are alarming: production has dropped by 30% since 2008, with nearly 100,000 jobs lost. Capacity utilization has fallen to unsustainable levels, while global overcapacity, which reached 551 million tonnes in 2023, continues to grow.   Our proposals, in line with the Draghi report, are essential for addressing this crisis:   👉 Strengthen EU Trade Defence Instruments: Robust measures are needed to combat unfair trade practices and mitigate the effects of global overcapacity.   👉 Improve the Carbon Border Adjustment Mechanism (CBAM): CBAM must prevent circumvention, preserve EU steel exports, and address delocalization of downstream sectors.   👉 Reduce energy costs: For energy-intensive industries like steel, lowering energy costs and securing raw material access is vital for global competitiveness.   👉 Establish lead markets for green steel: European governments must create demand for green steel, supporting decarbonization and the industry’s transition.   Europe’s steel industry is at a crossroads. We have the potential to lead the green transformation, but this will only be possible with the right support from policymakers. Now is the time to act.

16 February 2026: "The Economist" just published a superb analysis of the Russian economy. It is titled "Russia's Economy Has Entered the Death Zone." It underscores a central paradox: despite sweeping sanctions and prolonged war, Russia’s economy has not collapsed. But beneath the surface, the pressures are mounting — and the long-term costs are becoming harder to mask. (And now is the time for American sanctions.) The article identified three key dynamics: 1. War-Fueled Growth Is Not Sustainable Growth Russia has sustained headline GDP performance largely through extraordinary military spending and state-directed industrial mobilization. Defense production, security services, and war-related manufacturing have offset contractions elsewhere. But this is not broad-based economic vitality. It is fiscal stimulus concentrated in one sector — and financed at significant long-term cost. Private investment remains constrained. Consumer purchasing power is under pressure. And non-defense sectors face labor shortages and capital scarcity. 2. Structural Weaknesses Are Deepening Sanctions and export controls are steadily eroding Russia’s access to advanced technology, capital markets, and global supply chains. While Moscow has redirected trade toward China, India, and others, substitution is imperfect — especially in high-end components, energy technology, and aviation. Capital flight, brain drain, and demographic decline further complicate the outlook. The war has accelerated trends that were already challenging Russia’s long-term growth potential. 3. Fiscal and Financial Tradeoffs Are Intensifying Military spending has ballooned. The Kremlin can continue this in the near term, but it comes with tradeoffs: inflationary pressures, a weakening currency, and growing strain on the National Wealth Fund (projected to run out of money this year). Energy revenues — the backbone of Russia’s fiscal system — remain vulnerable to price volatility and enforcement of sanctions on exports. In short, resilience does not equal durability. Strategic Implication: Russia has demonstrated short-term adaptability under sanctions and war conditions. But the deeper question is whether an economy oriented around prolonged conflict, constrained capital access, and demographic headwinds can sustain strategic competition over the long haul. History suggests that economic fundamentals ultimately matter. The story is less about imminent collapse — and more about cumulative erosion. #russianeconomy #linkedintopvoices https://lnkd.in/dWAmhx_j

🆕 Following extensive consultations with our stakeholders, the European Commission has proposed a Steel Regulation that should help restore balance to the EU #steel market. WHY❓Global overcapacity, driven by non-market policies, is threatening the long-term competitiveness of European steel. In just a decade, the EU's steel trade balance has deteriorated dramatically: from a 11 million tonne surplus to a 10 million tonne deficit. Meanwhile, other economies are rapidly expanding their steel sectors. This is no longer just one country issue. WHAT❗️A new import regime, replacing the current safeguard that expires on 30 June 2026, will: ✔️ Cut the tariff-free import quota by 47%, from 33 million tonnes to 18.3 million tonnes. ✔️ Introduce a prohibitive 50% out-of-quota tariff. ✔️ Imports from all third countries - except our EEA partners - will be covered. ✔️ While importers must disclose where the steel was melted and poured. 🔜 These measures are WTO-compatible, clearly allowed under existing rules. Unlike others, the EU continues to be largely open and will transparently engage with partners under GATT Article XXVIII, offering compensation. We're committed to rules-based trade but must defend our interests. 👉 https://lnkd.in/ecmuXZSD 👉 https://lnkd.in/egGRdXpx EU Trade

A recent graphic shared by the current U.S. President and now circulating widely on social media - claims that countries like Vietnam, India, Indonesia, and China are charging the U.S. “massive tariffs” on U.S. goods: For eg. Vietnam: 90% India: 52% Indonesia: 64% China: 67% This is not just economically misleading - it's also factually incorrect. These numbers are NOT tariffs. They are trade surplus ratios. This is not how tariffs are calculated or reported. For example: Vietnam exports $136.6 billion to the U.S. and has a $123.5 billion surplus. 123.5 / 136.6 ≈ 90% - and this is falsely labeled as a tariff, which it is not. No country in the WTO charges 90% or even 50% on average. That would violate trade norms under the General Agreement on Tariffs and Trade (GATT), which the U.S. itself helped create. The chart is often used alongside rhetoric like -  “These countries are robbing American workers”, or “we’ll impose reciprocal tariffs and save American families billions in income tax”. The Tax Foundation and Brookings Institution have repeatedly shown that tariffs act like a regressive tax - disproportionately hurting lower-income households. Infact, a 2020 study by the New York Fed showed that the full burden of tariffs on Chinese goods was passed on to U.S. consumers in the form of higher prices. The narrative may sound populist, but the economic cost is inflationary and regressive. India doesn’t charge 52% tariffs on U.S. goods. We operate within WTO frameworks.

“Sanctions on russia don’t work.” Many continue to repeat this myth. Yet, sanctions on russia have forced a complete halt of commercial operations at russian project Arctic LNG 2, with the facility unable to export its accumulated inventory. Project's gas field output has plummeted by over 50% in October 2024 - from 12.1 million cubic meters daily in September to approximately 5.3 million cubic meters. Despite managing to ship eight LNG cargoes since August 2024, none have secured buyers in the market, revealing the depth of russia's international commercial isolation. Western restrictions have created a multi-layered crisis for the project by: blocking access to specialized South Korean ice-class tankers, deterring potential buyers globally, limiting shipping options and routes. The project's attempt to circumvent sanctions by using conventional gas carriers with opaque ownership structures highlights both the desperation and limitations of russia's counter-measures. And this is just one example.

The tariff announcement on April 2nd has sparked a sharp selloff in stock markets, and a flight-to-safety across asset classes. The new tariffs are estimated to raise the effective rate on all imports from 2.3% last year to around 25%, the highest in at least 100 years. After two years of above-trend economic growth in the U.S., the probability of a downturn has increased in coming quarters – assuming tariffs remain in place at current levels. Estimates based on a 2018 Federal Reserve model suggest a potential 2.4% hit to U.S. growth and a 1.4% rise in prices. In response to the reciprocal tariffs, however, some countries may choose to retaliate, while others may try to negotiate, and this process will play out over time. But in the near term high uncertainty will keep market volatility elevated. Despite the headwinds, the fundamentals heading into the tariff escalation are supportive: 1) Unemployment is low, 2) the Fed remains in a rate-cutting cycle, 3) corporate profits are still likely to rise this year though potentially less than the 10% expected before tariffs, and 4) the policy agenda may soon shift to pro-growth measures such as tax cuts and deregulation. While the immediate drawdown in stock markets may be jarring, investors with balanced and diversified portfolios have weathered the pullback better than those with concentrated positions. U.S. value sectors have outperformed, bond prices have rallied, and international markets are higher. We recommend that investors stay with their long-term investment strategy, emphasizing diversification and quality investments. Read more in our latest Daily Snapshot authored by Angelo Kourkafas, CFA Kourkafas.