The sweeping tariffs proposed by US President-elect Donald Trump on imports from Mexico, Canada and China are expected to have a direct impact on Austrian businesses, the Austrian Economic Chamber (WKO) has said.
The incoming US administration is planning a base tariff of 25% on goods from Mexico and Canada, along with an additional 10% on imports from China. The measures could affect around 100 Austrian companies with investments in Mexico, a third of which supply the automotive industry. Mexico is Austria’s most important trading partner outside Europe after the US and China, according to the WKO.
“Extensive US tariffs on Mexican imports would therefore directly affect Austrian businesses and put additional pressure on Austria’s export economy,” the WKO said in a statement.
Legal questions remain
What Trump will ultimately do as president remains uncertain, said Igor Sekardi, Head of International Relations and Markets at the Federation of Austrian Industries (IV). During his campaign, Trump proposed a 60% tariff on Chinese goods, but he has since scaled that back to 10%, Sekardi said.
While China is often portrayed as America’s main economic rival, Mexico and Canada are part of a free trade zone, which raises questions about the legality of imposing such tariffs.
“There are many legal issues to consider, and we need to see what, if anything, will actually materialise,” Sekardi said.
Mexico: A vital trade partner
Mexico has become the seventh-largest car producer in the world. Austrian exports to Mexico include machinery, iron, steel and aluminium products. However, the WKO stressed that the impact of potential US tariffs on Austrian exports and investments “naturally depends on the specific design of the measures.”
In September, Mexico overtook Canada as the US’s largest trading partner, accounting for nearly 16% of total trade volume. Canadian trade followed closely at nearly 14%. Mexican President Claudia Sheinbaum warned that the tariffs would also hit US car manufacturers operating in Mexico.
For Austrian firms, tariff-free access to the US is one of several factors influencing their decision to invest in Mexico, the WKO said.
Avoiding a trade war
The Federation of Austrian Industries (IV) has emphasised the need for a proactive approach to transatlantic trade relations. Europe, it said, must enhance its competitiveness in light of Trump’s focus on goods trade, planned tax cuts and cheaper fossil fuels. Diversifying export markets, particularly in Austria, is also seen as crucial.
Despite concerns, a trade war might still be avoidable, according to Holger Schmieding, Chief Economist at Berenberg Bank. “If Europe makes concessions in certain areas – such as increased military spending, purchasing more US arms, or importing more liquefied natural gas from the US – a full-scale trade war between the US and the EU could potentially be averted,” Schmieding said.
