Mary, what are the ramifications on the
auto sector, do you think? Yeah.
It's great to be with you. Well, first of all, when we're talking
trade with Canada and Mexico, the auto sector has to be the first up.
It's the most important export other

than fuel from Canada.
That comes from our two USMCA partners. Production is fully integrated between
the United States, Canada and Mexico. Cars go back and forth by some accounts,
but certain vehicles can go back and forth across the border seven or more
times before they're sent to an auto

dealer.
So this would be extremely disruptive. We would imagine that auto companies
would be lining up to tell the new administration how harmful this would
be, not only to the two countries involved in this, Canada and Mexico, but
to the United States and to the plants

that are in the United States waiting
for those parts. So undoubtedly, it would lead to
disruptions of U.S. production and increased costs, as many
would anticipate from a consumer perspective.
What about the supply chain when it affects China and US technology
companies here? 

How intertwined, how dependent does the
US remain on Chinese parts and goods? Yeah.
Since the first trade war, the US has depended less strongly on China.
But we have to remember that many of the electronics devices that we know and
love were not actually taxed under the

first trade war.
So vinyl items like laptops, notebooks,
smartwatches, cell phones, none of those were actually hit with the first trade
war. Tariffs, peripherals were things that we
may use with these devices. So that's you know, he's he has already
proposed or promised a flat 10% on China. 

We don't know if this extra 10% that he did that he sent out last night is by his social media posts, is on top of that or part of that. Either way, it's going to be extremely disruptive because our companies have

not had time to move these vast supply chains out of China. Take Apple for a case study. They have been trying to depend more on India, for example, other Southeast Asian countries. And we've seen Tim Cook just in China over the weekend trying to ensure that

relationships remain strong with the government there. But also many understand that has Tim Cook has a decent relationship with the incoming administration. Do you think CEOs are anticipating carve-outs? Do you think CEOs are able to manage this without passing it on to a consumer?

I think they understand how disruptive this would be and that if we know that there are constitutional limits on what the president can do. He's shown a penchant for trying to blow past a lot of the limits that people have tried to place on him. But he can't revoke the law of

economics. And there's economics limits to what he can do, or at least economic constraints are going to cause him a lot of trouble, not only in individual sectors, but on the macro front. Inflation will kick up again, for example, something which voters have

shown that they dislike intensely. So I think it would be wise that C-suites are anticipating that this will be either set up with carve-outs or it will be rolled back in terms of the absolute tax amount that he is going to levy. So I think we have a long way to go

before this social media quote becomes
new taxes on U.S. trade.
How effective in the first iteration were tariffs on changing the flow of
goods out of China into the US, reducing perhaps dependence or indeed the overall
trade excess or lack thereof?

I think we saw the value of trade
dropped by about 30% between, well, US and China.
Remember, China also retaliated against the US.
We would certainly expect to see some retaliation again, not just from China,
but also from our other partners.

So it had a significant effect on trade
flows. That said, a lot of that trade was
diverted to third countries. There's very little evidence that any of
that activity came back to the United States.
Some of it flowed to Vietnam, some of

the flow to other parts of East and
Southeast Asia. And, of course, some of it went into
Mexico, which is why we've seen our trade, particularly in electronics and
electrical devices, increase with Mexico.

Impact of Trump Tariffs on Tech

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Bloomberg Technology

Ramifications of USMCA Trade on the Auto Sector

The auto sector is the most important export from the USMCA partners (US, Canada, Mexico).

Production is highly integrated, with cars crossing borders multiple times before sale.

Disruption would be significant, harming US, Canadian, and Mexican auto industries.

Disruptions would lead to decreased US production and increased costs for consumers.

US dependence on China has decreased since the first trade war, but many electronics were unaffected.

A proposed 10% tariff on Chinese goods would be disruptive due to the lack of time to relocate supply chains.

Companies like Apple are trying to diversify, but haven't fully moved supply chains out of China.

CEOs are likely anticipating carve-outs or a rollback of tariffs.

Economic Constraints on Presidential Actions

There are economic limits to presidential actions; the law of economics cannot be revoked.

Increased inflation would be a consequence of tariffs, which is unpopular with voters.

CEOs should anticipate carve-outs or a rollback of the tariff amount.

Effectiveness of Previous Tariffs on China

Trade value between the US and China dropped by about 30% due to tariffs, with retaliatory measures from China.

Trade was diverted to third countries, with little evidence of it returning to the US.

Increased trade with Mexico in electronics and electrical devices resulted from the tariff.