Protectionism produces few winners

Firms operating within other sectors are also at risk under a US-led deglobalisation scenario.

For example, if Mexico chose to retaliate against unlawful tariff measures by rejecting the validity of US patents, the pharmaceutical industry’s profits would be put at risk. This would reduce the incentive for US multinational firms to innovate and create potentially life-saving medicines.
There are other types of companies that could be affected if their intellectual property rights were no longer respected, as agreed previously within the framework of the World Trade Organisation (WTO), including IT firms.

Some firms which have a high proportion of their value-add based in the US but which sell outside of the US would also suffer in the event of counter measures. These include Boeing, the leading aircraft manufacturer, which is a major US employer.

Furthermore, industries where domestic substitutes for raw materials do not exist and which already have low margins would suffer. These include the refinery and apparel sectors.

Other firms that have exposure to end-demand in regions geared to trade growth, or nondomestic government spending, could also see their current business models under threat.

Companies that sell in the US but create most of the value within their production processes elsewhere might also suffer, especially if they face competition from within the US. These include firms such as French wine and spirits producer Pernod Ricard. Brown-Forman, a US wine and spirits company, which both sells and produces a reasonable amount of its beverages within the US, would meanwhile benefit to a degree – though the firm also exports outside of the US.

The few possible winners from US-led deglobalisation include companies with a low proportion of US sales and low US value-add that compete with US firms. Such companies – operating in Europe, Australasia and the Far East – could gain from lower competition. This is only in the event of reciprocal tariffs being erected.

David Dudding – Global Equity Portfolio Manager – Columbia Threadneedle Investments