President Donald Trump’s tariffs have really stirred up the global trading world. While Canadians worry about the impact on U.S.-Canada relations, the consequences stretch far beyond that.
These tariffs are sending billions of dollars in exports, originally headed for the U.S., pouring into other markets, including Canada’s. This shift could lead to a major trade reorganization that will challenge even the most trade-friendly nations.
In 2024, about 15 percent of global imports went to the U.S.. Historically, the U.S. has been the biggest buyer worldwide, benefitting from average tariffs around 3.3 percent. But that changed dramatically on April 2, 2025, when the average tariff increased to an unprecedented 22 percent, marking the highest rate among major economies.
Even though some tariffs have been temporarily suspended, a baseline 10 percent and an array of sector-specific duties remain. This creates a new protective barrier around the U.S. that hasn’t been seen in generations.
A significant part of this trade disruption is tied to China. In 2024, China exported $438.9 billion worth of goods to the U.S. Many of these products entered the U.S. tax-free through e-commerce, thanks to a loophole for low-value items. However, on April 2, Trump ended this exemption for Chinese goods valued under $800 and slapped a hefty 34 percent tariff on all Chinese imports.
This increase was met with immediate retaliation from China, adding to the 20 percent fentanyl-related tariff. The result? An effective tariff rate that exceeds 100 percent, making it hugely expensive for China to export to the U.S.
During the previous trade war with China, the country rerouted many shipments through Southeast Asia. But this time, nations in that region are struggling too. Vietnam, for example, exported $137 billion in goods to the U.S. in 2024, but the recent 46 percent tariff on its products makes things tricky, even though it has been suspended temporarily.
The U.S. has also imposed a 25 percent tariff on imported cars. Countries like South Korea, Japan, and Germany, which ship vehicles to the U.S., may either absorb the additional costs or redirect their exports to different markets. In short, billions worth of trade is being rerouted globally.
The situation is reminiscent of the 1930s when the U.S. launched the Smoot-Hawley Tariff Act, which greatly raised tariffs during the Great Depression. This action led to a steep decline in global trade as nations retaliated against one another. The looming fear today is not just retaliation but the broader move towards protectionism that could arise from these tariffs.
Currently, the world might be in a more precarious position than it was in the 1930s. For years, Western leaders have raised concerns over “Chinese overcapacity,” criticizing China for under-consuming domestically while flooding global markets with cheap exports. Countries like Canada have already begun to protect their markets, imposing duties on Chinese electric vehicles to support their own industries.
As trade rules that used to prevent protectionism erode, even countries outside the U.S. are taking liberties with international agreements. This could lead to a cascade of restrictions as nations scramble to shield their economies from the effects of these global shifts.
Right now, the global trading system is at a significant crossroads. There’s an opportunity for nations to commit to international trade rules, which include provisions for temporary restrictions in times of crisis. If they do so, we can weather this storm together. But if the trend continues towards isolationism and protectionist measures, it could undermine the entire system that has fostered economic growth and stability for decades.
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