Trade War 2.0: The Global Economic Re-Alignment of 2025
Since the re-escalation of Trump-era tariffs, global trade has entered a new era—one defined by rerouted supply chains, shifting alliances, and a sharp decline in U.S.-centric trade.
U.S. Trade Contraction:
Between
January and May 2025, U.S. imports from China fell by nearly 50%, driven by
tariffs that peaked at 100%+ before stabilizing around 30%. Average U.S.
tariffs effective on Chinese goods across all categories likely settled in the
25–35% range
China’s
Strategic Pivot:
China has responded by deepening trade ties across
Asia, Europe, and the Global South. From Q3 2024 to Q3 2025, Chinese exports
rose by:
- $12B to Hong Kong
- $11B to Vietnam
- $5B to Thailand
- $15B to the EU
China
is also leveraging its dominance in rare earth processing to strengthen its
geopolitical trade footprint.
Winners
in the Realignment:
-Vietnam, Thailand, and Malaysia are absorbing supply chains once routed through
China.
-Mexico has
overtaken China as a preferred export base for U.S. buyers, thanks to USMCA
advantages and nearshoring momentum.
-The EU is
expanding both imports from China and exports to new markets, capitalizing on
diversified trade routes.
Canada’s
Quiet Transformation:
Canada’s
exports to the U.S. have declined sharply—especially in steel, aluminum, and
autos. While 90% of goods remain tariff-exempt under USMCA, others now face
duties up to 35%. In response:
*The U.S. share of Canadian exports fell to 68.3%
in May 2025—a historic low.
*Nearly 30% of Canadian exports now go to non-U.S.
markets.
*Crude oil shipments to the Netherlands and Hong
Kong, and gold exports to Britain, are rising fast.
*Ports like Montreal, Vancouver and Halifax are
also seeing increased flows to Europe and Asia, reinforcing Canada’s broader
trade diversification beyond the U.S. Vancouver remains Canada’s largest port,
with record volumes in 2025, while Halifax is positioning itself as a growing
Atlantic gateway.
This
diversification push coincides with a strategic rapprochement between Ottawa
and Beijing, aimed at stabilizing the trade relationship amidst the escalating
U.S. trade war. Following the bilateral meeting between Prime Minister Carney
and President Xi in October 2025, officials were directed to quickly resolve
trade irritants.
In
summary, we’re witnessing one of
the largest trade realignments since the 1930s. Billions in goods once destined
for the U.S. are now flowing elsewhere. The result? A more multipolar trade
landscape—less reliant on any single market, and more resilient in the face of
policy shocks.
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