In addition to the tariffs on Mexican, Canadian and Chinese imports, Trump is also set to announce a litany of what he deems to be reciprocal tariffs across the globe come April 2, the day after the conclusion of an investigation the President ordered. These tariffs are aimed at balancing trade with other countries, some of which have higher tariff rates on US exports than the US imposes on imports from those nations. At the close of fiscal 2024, the United States had trade deficits with 101 countries. Go USA!!!  The top 15 countries with the largest trade deficit with the U.S. in order are:  China: $279.4 billion, Mexico: $152.4 billion, Vietnam: $104.6 billion, Germany: $83.0 billion, Japan: $71.2 billion, Canada: $67.9 billion, Ireland: $65.3 billion, South Korea: $51.4 billion, Taiwan: $48.0 billion, Italy: $44.0 billion, India: $43.7 billion, Thailand: $40.7 billion, Malaysia: $26.7 billion, and Switzerland: $24.3 billion.

Now, given that this data mentioned above has been presented to the Trump administration via the current United States Trade Representative (USTR) Jamieson Greer, in more than just a few meetings, it’s no secret that if there’s a trade deficit on the books between a particular country and the U.S., Washington is aiming to make things right, at least on the balance sheet. Even our strongest allies and trading partners across the pond, like the EU, are on the chopping block. Trump even went as far to say that the EU was “formed to screw the United States.” I personally thought it was formed to boost economic growth and create stability in the region. Those who trade together stay together. At least, that’s the way it used to be, until the present-day US administration decided on using tariffs as leverage, even against their largest trade partners. Look, I get it, it’s not exactly fair us supporting a particular country’s imports, and that same country not supporting ours, to at least some modicum of equality in consumption. Are we to assume that U.S. products are of lower quality, are too expensive, or does the US absolutely suck at trade negotiations? Afterall, President Trump back in 2018 did call NAFTA at the time, USMCA now, the worst trade agreement he had ever seen in the history of trade among nations, and that it was a disaster, a nightmare of a deal. It’s tough to decipher in the language how he really felt about it…:-)

It’s not just about good deals and bad deals, as one cannot take a totally transactional look at international trade between countries. There are always several factors involved in cross border transactions that could cause a deficit on one side or the other. For the sake of brevity, and the ever-present short attention span theater, let’s take a look at just the top seven countries on the aforementioned list. Quite possibly there is a common theme within the various reasons for the deficits. Trust me, there is.

China: Many U.S. companies have outsourced manufacturing to China to take advantage of lower labor costs and economies of scale. In 2024, the average hourly labor cost for civilian workers in the U.S. was approximately $40, which includes wages, salaries, and benefits.  In China, the average annual wage in manufacturing was around 97,528 CNY (approximately $15,000) in 2024.  This translates to a much lower hourly labor cost of approximately US $3.70/hr. What’s amazing is that regardless of how depressing the hourly manufacturing wage is in China the quality has improved substantially within the last decade. Several factors have contributed to this improvement, inclusive of: Increased Quality Standards: By the end of 2024, 93.93% of Chinese manufacturing goods met the country’s quality standards, marking a steady improvement. Technological Advancements: China has invested heavily in research and development, with total spending in 2024 reaching approximately 3.613 trillion yuan (about US $500 billion). This investment has driven innovation and improved manufacturing processes. Digitization and Automation: The adoption of digital technologies and automation in manufacturing has enhanced precision and efficiency, leading to higher quality products. Government Initiatives: The Chinese government has also implemented policies and guidelines to promote quality development and management within the manufacturing sector. These efforts have collectively contributed to the notable improvement in the quality of Chinese manufacturing goods. In China, the quality of manufacturing is primarily overseen by the Ministry of Industry and Information Technology (MIIT). The MIIT works in conjunction with other agencies such as the National Development and Reform Commission (NDRC) and the National Financial Regulatory Administration to set and enforce quality standards. These organizations are responsible for implementing policies, guidelines, and initiatives aimed at improving the quality management capabilities of manufacturing enterprises. I have personally experienced this standard of high quality via shopping on AliExpress for the past 10 years. Ok…there was one shirt that I received that was like papier-mache, but that was one of probably 200 over the years.

Trade Policies: Tariffs and trade agreements have historically affected the flow of goods between the two countries. For example, the Section 301 tariffs imposed in 2018 by the Trump Administration are still in place to this day and are at the core of an ongoing trade war, yet the US still imported $462 billion in goods from China in 2024. China has imposed several more retaliatory tariffs on U.S. goods given the recent additional tariffs announced by the Trump administration. These tariffs vary depending on the product category. Here are some examples: Agricultural Products: Tariffs on U.S. agricultural exports such as soybeans, corn, and pork range from 5% to 25%. Energy Products: Tariffs on U.S. energy exports, including liquefied natural gas (LNG) and crude oil, are around 5% to 10%. Manufactured Goods: Various manufactured goods, including automobiles and machinery, face tariffs ranging from 10% to 25%. More to come I am sure in the tit-for-tat Clarice even if nobody claims to have eaten the other’s liver with a bottle of Chianti and some fava beans.

Exchange Rates: It’s no ancient Chinese secret that the value of the Chinese yuan relative to the U.S. dollar can affect the cost of imports and exports. China has devalued the yuan in the past to gain trade benefits. In 1994 China unified its dual exchange rate system, effectively devaluing the yuan by about 33%. In 2008 during the global financial crisis, China maintained an undervalued peg to the US dollar to boost exports. In August 2015 the People’s Bank of China (PBOC) devalued the yuan by about 3% over three consecutive days which was an obvious attempt to boost Chinese exports by making them cheaper and more competitive in global markets. More recently, China has maintained tight control over the yuan’s value, using it as a tool to support its economic goals and manage trade relations.  Investment Flows: U.S. investments in Chinese manufacturing and infrastructure also contribute to the trade imbalance. In 2024, U.S. investment in Chinese manufacturing was part of a broader trend of foreign direct investment (FDI) in China, which totaled $163 billion. In 2023 that total was $127 billion. I thought the FDI going into China had dried up with the exodus of international businesses from Hong Kong (the FDI gateway to the Chinese mainland) during the crackdown on democracy. I stand corrected. Anyway, these investments include but are not limited to: Electronics and Technology: This includes the production of semiconductors, consumer electronics, and telecommunications equipment. Automotive: Many U.S. automakers have established joint ventures and manufacturing plants in China to produce vehicles and automotive parts. It is worth mentioning some of these arrangements: General Motors (GM) has multiple joint ventures, including SAIC-GM-Wuling and FAW-GM. Volkswagen (VW): VW has partnerships with FAW-Volkswagen and SAIC Volkswagen.  Toyota collaborates with FAW Toyota and GAC Toyota. Ford has a joint venture with Changan Ford.  Honda partners with Dongfeng Honda and GAC Honda. BMW has a joint venture with Brilliance Auto Group, and Mercedes-Benz collaborates with BAIC Motors. Medical Devices and Pharmaceuticals: US companies have also invested in the production of medical equipment, pharmaceuticals, and biotechnology. Pfizer has established a strong presence in China, including manufacturing facilities and research collaborations. Machinery and Industrial Equipment: This sector includes the manufacturing of heavy machinery, industrial equipment, and tools.  

Mexico: Manufacturing and Supply Chains: Many U.S. companies have established manufacturing operations in Mexico via the IMMEX program to take advantage of lower labor costs and proximity, (nearshoring) leading to significant imports of goods produced there. Currently there are over 6,000 companies operating under the IMMEX (Industria Manufacturera, Maquiladora y de Servicios de Exportación) program in Mexico. This program is crucial for Mexico’s export and manufacturing sectors, with more than 90% of IMMEX companies conducting business with the U.S. We have worked extensively with clients over the years via our Mexico Legal Counsel helping businesses take advantage of this very essential program to USMCA that President Sheinbaum intends to improve upon by cutting red tape and removing several regulatory obstacles regarding establishing the IMMEX.  Automotive Industry: A large portion of the trade deficit is due to the import of vehicles and automotive parts which are continuously moving across borders from Canada and Mexico and the US. Mexico is a major hub for automotive manufacturing, producing vehicles for several well-known brands. Currently, the country manufactures vehicles for at least 12 different automotive labels, which include: General Motors (GM), Nissan, Stellantis (including brands like Chrysler, Dodge, Jeep, and Ram), Ford, Volkswagen, Toyota, Honda, Mazda, KIA, BMW, Audi and Mercedes-Benz, all of whom will soon be dominated by BYD manufacturing in Mexico. (Covered in one of my February 2025 newsletter articles: Chinese Industrial Parks in Mexico, a Growing Hub for Chinese FDI-(And BYD) Consumer Goods: The U.S. imports a wide range of consumer goods from Mexico, including electronics, appliances, and agricultural products. Trade Agreements: Agreements like the United States-Mexico-Canada Agreement (USMCA) facilitate trade but also contribute to the trade imbalance by making it easier for goods to flow between the countries. We, Braumiller Law Group, have spent countless hours qualifying products for the USMCA over the years, all of which could soon be blown-up via a 25% tariff on Mexico and Canada if they “stick”…which IMO they shouldn’t. It should never have happened in the first place. The close economic ties and integrated supply chains between the U.S. and Mexico fosters a significant amount of trade which often results in a trade deficit. In 2024, the total value of U.S. imports from Mexico was approximately $509.96 billion, which makes Mexico the largest US trade partner.

Vietnam: Many U.S. companies (Chinese too) have moved their manufacturing operations to Vietnam to take advantage of lower labor costs and favorable trade conditions, and of course Chinese companies are wanting to avoid tariffs on product eventually being exported into the US. Currently, in the year 2025, get this, the average hourly labor rate in Vietnam ranged from approximately VND 16,600 to VND 23,800 (about $0.70 to $1.00 USD) depending on the region, which is absolutely criminal in itself. Consumer Goods: The U.S. imports a significant amount of consumer goods from Vietnam, including electronics, textiles, and footwear. Currency Valuation: The Vietnamese dong is often kept at a lower value relative to the U.S. dollar, making Vietnamese exports cheaper and more attractive to U.S. consumers. Trade Policies: Trade agreements and policies between the U.S. and Vietnam facilitate the flow of goods, also contributing to the trade imbalance. These agreements have significantly boosted bilateral trade, which grew from $451 million in 1995 to nearly $130 billion in 2024. Vietnam’s tariff rates on U.S. imports vary depending on the product. Generally, most U.S. exports to Vietnam face tariffs of 15% or less. However, in recent years, Vietnam has increased applied tariff rates on several products, although these rates remain below its WTO bound levels.

Germany: High Demand for German Products: The U.S. imports a significant amount of high-quality German goods, including automobiles (like BMW and Mercedes-Benz), machinery, and medical instruments. In 2024, the total value of U.S. imports from Germany for vehicles was approximately $34.87 billion. This category represents a significant portion of the overall trade between the two countries. Manufacturing Excellence: German products are known for their precision and reliability, making them highly sought after in the U.S. market. I recall working for U.S. Steel Oilwell Division just out of college running the tubular reclamation department for drill pipe rejected by a 3^rd party inspection service at the drill site. It was primarily U.S. Steels own pipe being rejected 90% of the time. The imported German pipe, Mannesmann, never seemed to show up in the reject pile. (Neither did Nippon from the Japanese) Currency Valuation: The Euro’s value relative to the U.S. dollar can make German exports more competitively priced, contributing to the trade imbalance. Integrated Supply Chains: Many U.S. manufacturers rely on German parts and components, (Think BOSCH here) which are imported and used in U.S. production. In 2024, Bosch generated sales revenue of approximately €90.5 billion. This figure includes their global operations across various sectors, including automotive, industrial technology, consumer goods, energy and building technology. Most U.S. goods exported to Germany face tariffs of 0% to 5. %

Japan: Automotive Imports: A significant portion of the deficit comes from the import of Japanese automobiles and automotive parts. Brands like Toyota, Honda, and Nissan are very popular in the U.S.  as well as Lexus, which I drive. I love my RX 350. Electronics and Machinery: The U.S. imports a large volume of electronics, machinery, and equipment from Japan, including products from companies like Sony, Panasonic, and Hitachi. Consumer Preferences: High demand for high-quality Japanese goods, known for their reliability and advanced technology, also contributes to the trade imbalance. Trade Policies and Tariffs: Historical trade policies and tariffs have also played a role in shaping the trade dynamics between the two countries. The U.S.-Japan Trade Agreement (USJTA): Signed in October 2019 and effective from January 2020, eliminates or reduces tariffs on approximately $7.2 billion in U.S. agricultural exports to Japan. It also includes provisions for industrial goods. One would think this would have prevented any kind of deficit. The tariff rates on U.S. exports to Japan vary depending on the product. Generally, Japan maintains relatively low tariffs on many goods due to its commitments under the World Trade Organization (WTO) and various trade agreements. For example: Agricultural products: Tariffs can range from 0% to over 30%, depending on the specific product. Some items, like certain fruits and vegetables, may face higher tariffs. Industrial goods: Most industrial goods have low tariffs, often between 0% and 5%. Automobiles: Japan does not impose tariffs on imported automobiles from the U.S. The U.S. simply cannot meet the very stringent safety and emissions standards that Japan requires, as most manufacturers deem it to be too expensive to make the conversions. I just got back from Tokyo, and there is no place to park a car that has the standard wheelbase as American made. It just doesn’t fit the infrastructure. Currency Exchange Rates: The value of the Japanese yen relative to the U.S. dollar can affect the cost of imports and exports, influencing the trade balance. As mentioned, I traveled to Japan (Tokyo) a couple months ago and the exchange rate was one US dollar being equal to 150 Japanese Yen (JPY). It’s why the country is currently being trampled by tourists.

Canada: Energy Imports: A significant portion of the deficit is due to the import of crude oil and natural gas from Canada. The U.S. relies heavily on Canadian energy resources, which they could effectively use as leverage in the tit-for-tat with the Trump Administration on tariffs. This category was the largest export, valued at approximately $176.2 billion in 2024.  Automotive Industry: The trade in vehicles and automotive parts is substantial, with many U.S. and Canadian manufacturers deeply integrated into each other’s supply chains. In 2024, the U.S. imported a variety of automobiles from Canada, including: Passenger Cars: Brands like Ford, General Motors (Chevrolet, GMC, Cadillac), and Stellantis (Chrysler, Dodge, Jeep) manufacture many of their models in Canada. Light Trucks and SUVs: Popular models such as the Ford F-Series, Chevrolet Silverado, and Jeep Grand Cherokee are produced in Canadian plants and imported into the U.S. Luxury Vehicles: Some luxury brands, including certain models from Lincoln and Cadillac, are also manufactured in Canada and imported into the U.S. These imports are part of the highly integrated North American automotive supply chain, where parts and vehicles frequently cross borders during the manufacturing process. To qualify for the USMCA, (zero tariff rate) there must be at least 75% of core parts being manufactured in Mexico, Canada, and the US. Consumer Goods: The U.S. imports a variety of consumer goods from Canada, including machinery, equipment, and agricultural products, which amounted to $421 billion in 2024.  Last year the total value of U.S. exports to Canada was approximately $348.41 billion. To say the least, Canada is much more than simply a significant trading partner with the US. As for the reason tariffs were imposed on Canada, it was stated as an influx of fentanyl coming across the border into the US.  The fact is in 2024, approximately 21,103 pounds of fentanyl was seized at U.S. borders, of which Canada accounted for less than o.2%.

Ireland: And last but certainly not least of our magnificent seven in deficits with the US, Ireland. Ireland? Yes, Ireland. The U.S. trade deficit with Ireland is primarily driven by imports of pharmaceuticals, medical devices, and organic chemicals. Things that the U.S. is primarily incapable of manufacturing on their own at a competitive price.  In 2024, the United States imported pharmaceutical products from Ireland valued at approximately $50.32 billion, and medical devices valued at approximately $9.02 billion, and organic chemicals valued at $1.09 billion. These sectors account for a significant portion of the goods imported from Ireland, contributing to the overall trade imbalance. It is worth mentioning that the high demand for generic drugs in the US, which accounts for 91% of all prescriptions, is largely met by imports from countries that specialize in generic drug production such as India, China, and S. Korea. Most U.S. goods exported to Ireland face tariffs of 0% to 5. %

So, the common themes in review regarding the reasons why a country might have a trade imbalance with the U.S. includes several key factors, none of which directly point to the US getting raped by higher tariffs. Obviously, countries with lower labor and production costs can produce goods more cheaply, making their exports more competitive in the U.S. market. With there being no real sacrifice in quality in many instances, high demand in the U.S. for specific goods, such as electronics, automobiles, and textiles, often leads to higher imports from countries that specialize in these products. As a result, many U.S. companies have outsourced manufacturing to countries with lower costs, leading to significant imports of finished goods and components. For example, 90% of sneakers imported into the US come from Asia, and 56% of that is specifically from China. If we are talking electronic imports, approximately 60% come from countries like China, Taiwan, Vietnam, Malaysia, and South Korea. Exchange rates and labor costs aside, trade agreements and policies can also facilitate the flow of goods between countries, sometimes resulting in trade imbalances. Currently, the United States has 14 comprehensive free trade agreements (FTAs) in force with 20 countries, which are: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore. Additionally, the United States has an agreement focusing on free trade in critical minerals with Japan, which may be neglected if “the minerals deal” is signed by President  Zelensky, and we subsequently (next day) start raping the Ukraine landscape for the precious minerals that China is now denying exporting to the US. in a retaliatory move of course.

If/when tariffs are levied against a country to close the trade deficit gap, without truly examining the reason(s) for the imbalance, there will most likely be automatic retaliatory tariffs in a lose-lose situation. US consumers will ultimately pay the price, as well as SME’s. For imports coming into the US for example from China, the doubling down on the tariffs via the Trump administration will be devastating for some smaller businesses who cannot afford to pass the “tax” along to their customer base, and on the Fortune 50 side, Walmart’s lobbyists will continue to be extremely busy talking to many D.C. GOP contacts who will refuse to listen, or at least say anything publicly in opposition to the Trump mandates. Why is this important? Sam Walton opened the first Walmart store in Rogers, Arkansas, in 1962. By 1980, the retail chain operated 276 locations and achieved $1 billion in sales. By 1990, Walmart became the No. 1 retailer in the US.  Currently, Walmart operates 4,599 stores across the United States, (let’s just call it 4600 because they are building another one as I write this) with earnings of $648 billion on the books in revenue for the fiscal year 2024. All of this has been accomplished via approximately 80% of Walmart product sold in the U.S. having been sourced from China. Walmart, or as I fondly call it, Wally World…well…it’s where America shops. So, I ask, among the various reasons that the US has a trade deficit with China…aren’t American shoppers also to blame? Afterall, approximately 44% of the U.S. population shops at Walmart each year. Now, there isn’t data available pinpointing just how many Walmart shoppers voted for Trump. However, it’s well known that Walmart’s customer base tends to be more conservative when compared to other retailers. This demographic trend suggests that a significant portion of Walmart shoppers may have supported Trump in the elections. Well, there are 342 million people in the US, of which about 64% cast a ballot in the 2024 election. So, 64% of 342 million is 218,880,000, and let’s just say 44% of that being Walmart shoppers is 96,307,200. Walmart has already said that prices are going up on several items due to the new tariffs. A good portion of the MAGA base is not going to be very happy in another 90 days. (Insert Homer Simpson Doh! here)