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[The Peterson Institute for International Economics believes that the 10% tariff plan will be fully passed on to American consumers, resulting in consumer costs of at least 1.8% of GDP.]

According to the remarks on tariffs and trade made by former US President and Republican presidential candidate Trump in his recent election speech, if he is re-elected to the White House, the global economy will be devastated by the US tariffs. Trump's tariff plan has three key points: first, a general base tariff of 10% on almost all imported goods; second, a 60% tariff on all imports from China; and third, a reciprocal tariff, that is, a tariff or special value-added tax that matches the tariffs imposed by other countries on US exports.

10% tariffs hit economies of major trading partners

First, it will hit the Mexican economy. Higher U.S. import tariffs could lead to a sharp fall in the Mexican peso and higher interest rates. Mexico's trade with the United States accounts for about one-third of its GDP. Capital Economics estimates that a 10% general tariff could reduce U.S. imports by 5%, ultimately reducing Mexico's GDP by 1.5% or more. A large number of goods cross the U.S.-Mexico border multiple times before being assembled into final products. The new tariffs could raise the price of some goods by 10%.

Mexico has deep supply chain ties with the United States, meaning that many goods cross borders multiple times, which also means that the impact of tariffs will be amplified, which may force some companies to scale back their operations in Mexico. The American Automobile Manufacturers Alliance said that auto parts cross borders as many as eight times. Some companies may be forced to concentrate production in the United States or Mexico instead of producing in both places at the same time. This eventually led to Mexico taking retaliatory measures and imposing tariffs on exports from the United States. On March 16 this year, Trump said that if he was re-elected as president, he would impose a 100% tariff on cars produced by Chinese automakers in Mexico to prevent cheap Chinese cars from flowing into the United States. Due to the uncertainty of the US election, Musk said on July 23 that investment in the Mexican factory under construction is currently "suspended."