Report: Possible shifts in US trade policy would have implications even for Finland
Possible shifts in US trade policy, although directed against China, would have implications even for Finland, the Research Institute of the Finnish Economy (ETLA) estimates in its report “Shield the US from Imports! GDP Impacts on Finland and Other European Union Member States”, which was commissioned by the Ministry for Foreign Affairs and the Ministry of Economic Affairs and Employment.
The report speculates on the effects of protectionist trade policies and the implications for the European Union, China and Mexico of the possible punitive tariffs imposed by the United States. Protectionism is gaining ground in international trade policy, threatening the operations of the global value chains.
The global value chains are not only about transit exports: Finnish added value is exported to the United States even as part of third-country products. This means that Finland exports intermediate products first to third countries for refining and then to the United States.
“The United States is Finland’s largest export market in terms of added value. If the US imposed punitive tariffs on imports from China, for example, it would lead to countermeasures and there would be serious implications even for Finland and the entire EU. A trade war between the two largest economies in the world would also harm third countries,” says Minister for Foreign Trade and Development Kai Mykkänen.
It is possible to countermeasure trade protectionism, according to ETLA. “The United States has yet to take action. Considering the interdependence in international trade, it is vital for Finland that free trade continues,” says Minister of Economic Affairs Mika Lintilä.
ETLA estimates that if the US imposed a 45% punitive tariff on Chinese imports and a 35% tariff on Mexican imports, the added value of Finnish exports would decrease by USD 0.21 billion, corresponding to 0.09% of Finland’s GDP. However, Finland would not be the worst off in the EU; the tariffs would harm Ireland, Germany and Luxembourg the most. The impact of the punitive tariffs would be greater if the US imposed them directly on imports from the European Union. A tariff of 15%, at the most, on European imports would reduce the Finnish added value to an amount corresponding to 0.58% of Finland’s GDP.
In terms of added value, the US is the largest destination for Finnish exports, and nearly one third of these exports are channelled through global value chains and third countries. The United States, too, has expressed protectionist views, which means that protectionist impacts on trade may reach even Finland.
Pasi-Heikki Vaaranmaa, Director, tel. +358 295 351 700, and Mary-Anne Nojonen, Commercial Counsellor, tel. +358 295 351 494, Unit for Trade Policy, Ministry for Foreign Affairs; Maria Kauko, Ministerial Adviser, tel. +358 295 048 240 Ministry of Economic Affairs and Employment