Since taking office, President Donald Trump has threatened tariffs on an array of trading partners, including Mexico, Canada, Europe, Colombia and India. He has instituted a 10 percent tariff on Chinese goods and a 25 percent tariff on aluminum and steel imports.

Which nation ultimately bears the cost of a tariff depends on what that country makes and its pull in the global market. But economists warn that the added tax will largely fall on American businesses and consumers.

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The United States is the largest importer of goods in the world, giving it significant sway in a trade war. It is also the top export market for more than 20 countries, making exports to the United States a sizable portion of many countries’ economies.

Mexico’s and Canada’s economies are the most reliant on exports to the United States; both countries were threatened with 25 percent tariffs that are now under a 30-day reprieve. But that doesn’t mean they are necessarily the most vulnerable to tariffs. Who bears the cost and risk of the trade tax depends more on the product than where it is made.

A country is most vulnerable if it primarily produces goods that can easily be made in many places, such as garments or agricultural products, and the United States is its biggest customer. In those cases, American importers could substitute goods from another country to avoid paying the tariff. The exporter might have to lower their prices and eat the cost of the tariff to keep selling to the United States.

“When [the United States] can just decide to stop importing from another country because of a change in cost, like garments from El Salvador, then El Salvador will definitely be in a lot of trouble,” said Gilberto García-Vazquez, chief economist at the Observatory for Economic Complexity, a trade data platform. “And U.S. consumers will hardly notice.”

On the other hand, a country that is the main source of a particular good has a lot more leverage. There is no incentive to lower prices when American importers can’t get that good anywhere else.

That’s what happened during the trade war in the first Trump administration, according to Chad Bown, a senior fellow at the Peterson Institute for International Economics and former chief economist for the State Department.

In theory, Bown said, “we’re big bad America and everybody is so reliant on our market that we can force them to accept the lower prices to continue to sell to our market. ... But it just didn’t work.”

Instead, U.S. importers paid the cost and will probably pay them for future tariffs, potentially passing the price increases on to consumers.

Many Chinese goods fall into this category because China dominates the global market for many products Americans buy. Even when faced with a 10 percent tariff, American importers will have to continue buying products such as laptops and smartphones from China because no other country can produce the same volume for American consumers.

Sometimes a country with a relatively small slice of the export market can keep its grip on American markets because it has the infrastructure to deliver the goods. If a tariff is applied to Canada, for instance, Canadian exporters of crude oil and natural gas won’t need to reduce their prices because American pipelines and refineries are set up specifically for Canadian fossil fuels.

The U.S. economy is so interwoven with Canada and Mexico that tariffs can come with additional costs. A vehicle assembled in Mexico can have parts from the United States and Canada. Tariffs might hurt the Mexican businesses that assemble the vehicles, but they will also hurt American factories that supply the parts.

Broad tariffs for close trade partners or essential goods can have ripple effects across the entire economy. If a company has to pay more for its imports because of a tariff, it might need to raise prices or lay off workers to stay in business.

The Trump administration’s tariffs on steel and aluminum in 2018 created a brief renaissance for American steel producers but increased pressure on other manufacturers. In 2019, researchers estimated that every job created by steel tariffs cost U.S. consumers and businesses $900,000 per year.

A similar outcome is expected for his most recent tax on imported steel and aluminum. With a metals tariff placed on every exporting country, no nation has an incentive to lower prices to hold on to the American market.

The negative effects can be magnified if countries retaliate with tariffs of their own, potentially reducing the demand for American goods abroad. After China imposed retaliatory tariffs on American goods in 2018, American exports to China dropped by 26 percent.

Last week, China announced counter-tariffs against the United States just minutes after the Trump administration announced its 10 percent levy on Chinese goods.

“It’s an extremely bold move for one country, even the U.S., to impose tariffs on their three main trading partners, Mexico, Canada and China,” García-Vazquez said. “All of a sudden, you have these additional costs for your consumers and your industry. ... That’s a self-inflicted wound on your economy of a massive, massive size.”

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