As reported by the Financial Times, Apple plans to move all of its US iPhone production to India.

More than 60 million iPhones are sold annually in the US. Apple plans to source this from India in its entirety by the end of 2026. 

This is a significant pivot away from China, where Apple has established its production over decades. An estimated nine in 10 iPhones are made in China – accounting for nearly 200 million devices – and approximately 150 of Apple’s top 187 suppliers had factories in China in 2024.

India is subject to a baseline levy of 10% by the US; the 27% ‘reciprocal’ tariff which it was set to face has now been put on hold until 9 July. 

On the other hand, China has been hit by import taxes of up to 145%, and China has hit back with a 125% tax on American products. Although developments this morning show promising signs of de-escalation – US President Donald Trump told reporters, “We may reveal it later, but they had meetings this morning, and we’ve been meeting with China” – relocating to India may instil more confidence amongst investors.

After Apple entered China in the 1990s, the relationship between the company and the country has been one of reciprocal benefit. As China opened up to the world, Apple grew more entrenched in its manufacturing sector.

In an interview last year, Apple’s CEO Tim Cook said, “There’s no supply chain in the world that’s more critical to us than China.” Both in practice and in threat, tariffs have forced U-turns in manufacturing strategies for many large American businesses.

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The WTO’s Global Trade Outlook for April 2025, published on Wednesday, 16 April, presents a grim view of international trade, one marred by reciprocal tariffs and fears of a worldwide trade war.

In its first report since Trump’s broad-ranging tariffs came into effect, the WTO revised its estimates of global trade volumes, forecasting they would fall by 0.2% in 2025 and pick up slightly in 2026, rising by 2.5%. In the October report, trade volumes were predicted to rise by 3% in 2025 after a strong 2.7% growth in 2024.

A forecasted 1.7% reduction in North American trade is largely responsible for the shift, while merchandise trade is expected to keep rising, albeit less than previous estimates, in the rest of the world. The most marked decrease is expected to be in Asian trade, now forecasted to only grow by 0.6% compared to the impressive 7.4% growth projected in the October report. 

This comes as tariffs imposed by the Trump administration come into effect all over the world; while many of the headline-making country-specific tariffs have been halted for 90 days, the 10% baseline tariff remains for all exports to the US. Nevertheless, the trade uncertainty caused by the tariff announcements and fears of further tariffs on specific industries, like pharmaceuticals or metals, is responsible for the “significant reversal” in estimates, said the WTO. 

US tariffs on China, the only ones not subject to the 90-day delay, currently stand at 145%, with a 125% reciprocal tariff levied by China on US goods. This is expected to lead to a sharp fall in US imports from China, creating opportunities for suppliers from emerging economies to fill the gap. Similarly, Chinese exports to all regions except North America are expected to rise by as much as 9% as goods are redirected outside the US.

If the currently suspended tariffs were to come into effect, they would lead to a further reduction of 0.6% in global trade, with emerging economies bearing the brunt of the effect. A rise in trade policy uncertainty, for example if more countries enacted reciprocal tariffs against the US, could lead to a further 0.8% decline, for a total of -1.5% trade growth in 2025.

The report marks the first time the WTO measures trade in services, a growing but oft-overlooked sector in global trade. Services trade is expected to grow significantly in 2025, but tariff-related uncertainty and a decrease in global trade will see it rise by just 4%, more than a percentage point below pre-tariff estimates. 

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In the trade finance industry, what many are wondering is: will these changes hurt trade finance, supply chain finance, factoring, and every other kind of financial vehicle connected to international trade?

Fortunately, there are ways to predict the tariffs’ effects – for example, using the data from the last trade war, which happened between 2017 and 2019, as a frame of reference. During that time, the devastating Covid-19 pandemic was also compounding the disruption impacting trade and therefore trade finance.

Global trade did decelerate in 2019 when President Trump imposed tariffs during his first term in office. However, as a report by Allianz Global Investors points out, “a closer examination of broader data suggests Mr Trump’s tariffs may have disrupted global trade only marginally.”

Despite the tariffs, international trade as a share of global GDP exceeded 60% for the first time in a decade only 3 years later, in 2022.  As many expected, trade did contract between China and the US, but growth from other regions offset the reductions. 

During the first trade war, supply chain finance grew at a compound annual growth rate of 26% from 2017 to 2023 despite an increase in global protectionism and tariffs.

Factoring finance ⏤ mainly used by small businesses and mid-market companies to raise finance against their invoices payable ⏤ still grew at a rate of 5%, despite the same headwinds and uncertainty.

If everything plays out along similar lines, then we can expect similar outcomes during this trade war.

The potential of trade finance distribution

Trade finance distribution is a way of unlocking liquidity from trade finance products. Once an originator (like a bank or fintech) provides financing, they can sell or distribute individual or groups of trade finance products to other investors in the market.

This is usually done on an “originate-to-distribute” (OTD) model to ensure a bank is holding on to large volumes of trade finance exposure on their balance sheets. It unlocks opportunities and growth revenue for every party in the transaction. 

How funds and documents flow in supply chain finance (SCF)

For banks, asset managers, institutional investors, non-bank lenders, and alternative credit funds, the attraction of trade finance and distribution is hard to ignore:

• Trade finance is a high-growth sector, currently worth $9.7 trillion and a projected growth of 3.1% in the next 10 years.
• 80 to 90% of global trade relies, in some way, on trade finance.
• There is currently a massive trade finance gap, estimated to reach $2.5 trillion this year. This trade finance gap is especially high in Africa, Asia, and the United Arab Emirates.
• Supply chain finance continues to grow at a yearly rate of 7% and is currently worth $2.34 trillion
• Asia and Africa are seeing the fastest growth in volume of supply chain finance, up 29% and 17% year-on-year, respectively
• Trade finance instruments are always short-term, self-financing, self-collateralized, and can be insured. This makes them very attractive from an investor perspective.
• Unlike other asset classes, such as debt financing or even real estate, the default rates of trade finance and asset distribution have always been very low (in most cases, under 0.25%).

With all of that in mind, trade finance distribution seems like an opportunity that can’t be missed.

It’s one of the reasons Trade Finance Global launched the TFG Distribution Finance initiative in July 2023, which aims to identify and address unmet demands in the trade finance market, working towards closing the trade finance gap

At the same time, with the impending gradual phase-in of Basel III Endgame rules, (which starts on 1 July 2025) banks are keen to de-leverage balance sheets.

Fortunately, the IMF already thought about the impact of Basel III on trade finance. Despite the rules around Tier-1 banks (especially the global 37 with over $100 billion on their balance sheets), trade finance is “clearly not the target of the re-regulation exercise” because they are “low-risk, highly collateralized . . . with a very small loss record”, as the  IMF noted in a policy paper about Basel III in 2014.

All of this makes now the perfect time for banks, asset managers, institutional investors, non-bank lenders, and alternative credit funds to get into trade finance distribution or scale-up current operations.

The question is, can this be done without over-leveraging risk, or increasing headcount?

Accessing distribution sustainably

Trade finance distribution should unlock new revenue opportunities for banks, asset managers, or corporates.

If organisations understand the market, they can leverage against any risk factors and avoid increasing their headcounts unnecessarily.

For financial players getting into or scaling-up distribution, LiquidX’s white-label platform enables seamless integration of distribution into the organisation’s existing offerings while maintaining brand identity.

Thanks to LiquidX’s award-winning capabilities and a deep partnership with Broadridge  ⏤ a trusted global fintech leader ⏤ financial institutions wanting to enter trade finance distribution can outsource this function completely without needing to recruit more staff. LiquidX’s software takes care of everything, from digitization at one end to distribution at the other; its solutions cater to a network of over 90 banks and asset managers worldwide.

Digital solutions for trade finance distribution

Organizations looking to get into trade finance distribution or wanting to scale up existing operations should be cautious and do quality research first.  The steps and precautions to take will vary according to whether companies are starting from scratch and want to syndicate, buy, sell, or use an originate-to-distribute model, or if they are looking to grow their existing offerings.

One of the biggest challenges faced by companies is often managing the inflows and outflows of money and documents from different sources. Having a tool for managing multiple sources of data that’s platform-agnostic makes getting into distribution much easier. 

Now more than ever, distribution is a high-growth opportunity for banks, asset managers, institutional investors, non-bank lenders, and alternative credit funds. Using solutions like LiquidX can help companies take advantage of this opportunity and leverage the enormous potential trade finance distribution has to offer.

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This comes in anticipation of a flurry of tariffs expected to be released by the US on 2 April. As both companies and countries scramble to plan a response to the tariffs, China may be looking for a way to increase its own resilience and take up some of the US’s declining dominance in global trade. 

The French and Chinese foreign ministers met in Beijing yesterday to discuss deepening cooperation between the two countries, with Chinese foreign minister Wang Yi vowing to “uphold multilateralism [and] oppose unilateralism” in clear opposition to Trump. The officials agreed to strengthen economic relations between France and China by encouraging Chinese investment in France and working together on a range of industries, from agriculture to artificial intelligence. 

This move is especially significant as the EU and China have been involved in a trade spat since October, when the bloc imposed high tariffs on China’s auto industry and China retaliated by taxing European brandy imports, hitting the French cognac industry hard. That the two countries are vowing to increase cooperation and find a solution to the reciprocal tariffs is a significant step, which may in part be in an effort to present a united front to upcoming US-imposed sanctions.  

On the industry side, Xi met with over 40 CEOs and executives from companies around the world including FedEx, AstraZeneca, and Standard Chartered to discuss supply chain resilience and stability. The meeting is ostensibly just a second iteration of an event held at the same time last year with US executives and occurred just a few days after the China Development Forum, China’s most important business summit. However, the backdrop of US sanctions clearly influenced the discussions, which reportedly centred around increasing resilience and cooperation. 

While some governments are scrambling to hold last-minute negotiations to decrease the impact of tariffs, many others are looking for alternative trade partners to diversify their export markets and increase resilience. At the same time, companies – especially those with complex supply chains which may experience an exponential effect from tariffs – will be searching for ways to protect their supply chains and be less reliant on US markets. 

China, which has been grappling with slowing growth and weakening domestic demand, could be hard-hit by the sanctions too – especially with its $800 billion car and EV industry facing high tariffs. China may be looking to place itself as a viable alternative to the US when it comes to restructuring supply chains, courting Western and emerging economies alike.

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This comes amidst reports that the Chinese government would be investigating CK Hutchinson’s sale of the two key Panama ports to US investment giant BlackRock, in a deal likely partially motivated by President Trump’s plans to place the crucial waterway back under American control. 

On Tuesday, 18 March, Bloomberg reported that senior Chinese government officials have instructed state agencies, including the State Administration of Market Regulation, China’s main antitrust agency, to study the sale for potential breaches of security or antitrust issues. The deal, announced on 4 March, involves CK Hutchinson, a Hong Kong-based conglomerate, selling controlling stakes in a total of 45 ports in 23 countries, including the Balboa and Cristobal ports, to a group of investors backed by BlackRock. This would make BlackRock the world’s third-largest port operator, giving it control over 10.4% of global container traffic. 

The deal was speculated to have been at least partially due to Trump’s insistence that the Panama Canal go back under US control, which he reiterated during the State of the Union address. While the proposed sale would not give the canal itself back to the US, instead handing over management of two ports at either end of it to an American company, the Trump administration has claimed it as a win.

However, pushback from China and Hong Kong, as well as Panama, whose government needs to approve the sale before it goes ahead, is threatening to jeopardise the deal. A spokesperson for the Chinese foreign ministry commenting on the deal said that “China has always firmly opposed the use of economic coercion, hegemonism and bullying to infringe upon the legitimate rights and interests of other countries,” while John Lee, Hong Kong’s Chief Executive, said on Tuesday that the country opposed “the abusive use of coercion or bullying tactics in international, economic, and trade relations.”

While neither the Chinese nor the Hong Kong governments have explicitly spoken out about the sale and lack an obvious route to stopping it as the buyer and port are outside Chinese territory, oblique statements and the rumoured additional scrutiny on the deal are likely to further delay the sale. 

The Chinese government could intervene with the sale by using antitrust laws that restrict extraterritorial sales with an effect on domestic competition or by designating the sale as having national security implications. While direct action to completely halt the sale is unlikely, recent comments and the reports of an investigation into the deal point to increased government scrutiny and potential pushback. China isn’t alone in disapproving of the deal, with Panama’s president, José Raúl Mulino, saying on 5 March in response to Trump’s comments that the canal “is Panamanian and will continue to be Panamanian.”

China, Hong Kong, and Panama’s pushback against the deal risk disrupting the sale placing a shadow of uncertainty on one of the few global shipping channels that have been until now unaffected by geopolitical tensions and delaying BlackRock’s proposed investments in the ports. In the wider context, this could represent a further trend of resistance to the US’s recent efforts to regain the hegemony of the last century. 

The Trump administration’s attempts to place itself back at the centre of the global political and economic stage through increased tariffs, involvement in major conflicts, and attempts to exert more control on emerging economies have all been met with international pushback. Global trade is one of the industries most affected by this, thanks both to its inherent vulnerability to geopolitical uncertainty and to Trump’s aggressive tariff strategies; that international attention is shifting to crucial shipping channels could put the industry even more on edge, potentially affecting supply chains all over the world. 

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US Treasury yields dipped on Tuesday 4 March as markets digest the first day of President Donald Trump’s sweeping new tariffs against China, Canada, and Mexico, with both Beijing and Ottawa swiftly unveiling retaliatory measures.

China and Canada have moved decisively to counter the US tariffs that came into force at midnight US time. Trump’s duties of 25% against goods from Canada and Mexico, and 20% against Chinese imports, will affect more than £722 billion worth of US imports from America’s two biggest trading partners.

Justin Trudeau, the Canadian prime minister, announced immediate 25% tariffs on C$30 billion worth ($20.7 billion) of US imports. Ottawa further warned it would place tariffs on an additional C$125 billion ($86.2 billion) of American goods if Trump’s levies remain in place after 21 days.

“Tariffs will disrupt an incredibly successful trading relationship,” Trudeau said, noting that the US measures violate the US-Mexico-Canada free trade agreement that Trump himself signed during his first term.

China responded by targeting America’s agricultural sector, announcing fresh tariffs of up to 15% on chicken, wheat, corn and cotton imports from the US. Additional 10% tariffs will be imposed on sorghum, soya beans, pork, beef and various other US farm exports.

“The US’s unilateral tariff increase damages the multilateral trading system, increases the burden on US companies and consumers, and undermines the foundation of economic and trade cooperation between China and the US,” China’s finance ministry said in a statement.

Global markets reflected growing anxiety, with Asian indices posting losses after sharp falls in US markets on Monday. Japan’s Nikkei dropped 1.6%, Hong Kong’s Hang Seng declined 0.8%, and European markets also opened lower. The FTSE 100 fell 0.65% to 8,813 points, while France’s CAC 40 dropped 0.9%.

Both the Canadian dollar and Mexican peso fell to their lowest levels in a month. US Treasury yields reflected these tensions, with the benchmark 10-year yield slipping about 1 basis point to 4.168% as investors sought safer assets.

Economists warn that Trump’s tariff strategy could backfire on the US economy. The Peterson Institute for International Economics has described the tariffs as “the largest tax increase in at least a generation”, estimating they would cost the typical US household more than $1,200 annually.

The situation has been compared with the Smoot-Hawley Tariff Act in 1930; with some level of tariff implemented on all countries exporting to the US, and rates up to 80%, it has been credited as exacerbating the Great Depression. As was the case a century ago, American farmers already see their output suffering as tariffs that make products from other nations more competitive. 

Trump has signalled this is merely the opening salvo in his trade strategy. Steel and aluminium tariffs are set to take effect on 12 March, with “reciprocal tariffs” expected on 2 April.

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This comes amid worries about domestic currencies’ positions compared to a strong dollar in the face of tariffs. 

In China, foreign reserves rose by $40 billion in January thanks to increasing private and corporate foreign reserves purchases – likely connected to fears of a yuan depreciation. This was the biggest rise since April 2021, bolstered by both individuals and non-financial institutions.

In Indonesia and India, central banks are shoring up domestic currencies by shorting the dollar through derivatives, pointing to worries about the knock-on effects of tariffs against China on the region.  

The Asian economic giants have been on edge ever since the first round of US tariffs was announced, fearing a drop in exports could harm domestic economies and devalue currencies. The US is the biggest single importer of Chinese goods; Trump’s wide-ranging tariff regime, including a 10% tariff on all goods and specific measures targeting shipments from low-cost Chinese retail giants, could significantly impact the foreign exchange rate in the next months. 

The Chinese economy has been faltering in the last year, with frequent rate cuts by the Chinese central bank struggling to revive it. Amid low interest rates and fears of a recession, exacerbated by the potential effects of US tariffs, Chinese investors will be looking towards foreign currencies—especially the dollar—for higher yields and more security. 

Elsewhere in Asia, central banks are using derivatives, like net dollar short forward positions, to protect their own currencies against a strengthening dollar. The Reserve Bank of India has recently increased its net dollar short forward position to an all time high, while the Indonesian central bank’s net short book reached a 10-year high this month. 

Some see this as an attempt to temporarily strengthen currencies by making commitments that may be hard to keep in the future. However, it could also signal confidence from Asian banks that the current tensions between Asian giants and the US are only temporary and will not have a wide-ranging effect on the region. 

Already, the limited nature of the tariffs that have been announced – a far cry from the 60% discussed during Trump’s campaign – could reassure investors. Growth in the Chinese tech sector, driven by the launch of the Chinese AI app DeepSeek, a low-cost alternative to ChatGPT, could also boost the economy. 

These currency trends could have a knock-on effect on the type and magnitude of tariffs the Trump administration sets on Asian exporters. Trump has accused China of currency manipulation as far back as 2018, and US Treasury Secretary Scott Bessent has recently announced an investigation into currency manipulation as a way to lower the impact of tariffs, expected to produce results by 1 April.  

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A new wave of Trump trade policies targeting Chinese imports of consumer goods from budget online stores like Shein and Temu showcase Trump’s continued efforts to curb foreign imports, using a wide array of methods beyond blanket tariffs. However, Vincent Clerc, head of shipping giant Maersk, told the Financial Times today that this, and Trump’s tariff regime as a whole, could have less of an impact on global trade volumes than was initially thought if consumer demand and purchasing power remains stable. 

The US Postal Service (USPS) announced today it would suspend delivery of all parcels coming from China and Hong Kong without an explanation. At the same time, the new package of tariffs against China included the closure of a little-known loophole, making imports of cheap consumer goods more expensive and cumbersome. 

Trump’s new tariffs on China, announced on Monday 3 February, made headlines for enacting 10% levies on all goods imported from the country, on top of already existing duties. This has sent shock waves through the world of global trade, as exporters, logistics companies, and governments of the US’s trade partners wait to see how the new tariff regime – which Trump has promised will extend to Canada, Mexico, and the EU soon – affects global demand.

However, fears that this will bring global trade to its knees may be overblown, suggests the Maersk chief executive. “The reason why we don’t expect a massive impact is what really matters is not tariffs but what the purchasing power of consumers looks like,” Clerc said. It will be hard to measure the impact of any tariffs until their details are announced, they are enacted, and consumers have a chance to adjust their behaviour. 

The de minimis exception is just one example of the way tariffs can have unexpected effects and affect different aspects of trade differently. Trump’s promised tariffs have often been less disruptive in practice than in theory: campaign promises of 60% tariffs on all Chinese goods only materialised as 10% levies, and talk of similar measures against Canada, Mexico, and the EU has yet to materialise into concrete policies. It makes sense, then, that world trade is waiting to see how the tariff threats play out before being too pessimistic. Maersk, for example, still forecasts a 4% growth in global trade in 2025, up from 3.3% in 2024, showing optimism in trade’s resilience even in the face of tariffs.

A condition hidden in the fine print of the tariffs, however, could have just as much impact as the headline rate, with an immediate effect on consumer imports from Chinese consumer retail giants. Trump’s new package of tariffs removes the de minimis exception, which had allowed shipments with a value of under $800 to bypass customs checks and be exempt from tariffs. The new tariffs apply to all goods imported from China, regardless of destination or shipment size, meaning prices of many low-cost imports of retail consumer goods are expected to skyrocket.

This is expected to significantly challenge the business models of retail giants that appeal to American consumers with low prices and a wide range of products, from clothes to furniture and craft supplies. Companies like Temu and Shein often rely on US logistics companies and USPS to get goods to their final destinations; their imports fly largely under the radar at customs as the value of each individual shipment is often lower than the minimum value that would trigger scrutiny or duties. 

This move forms part of the Trump administration’s plan to enact tariffs on many of its most important trading partners in an effort to promote the US economy and discourage unwanted behaviour, such as illegal immigration or the import of fentanyl which Trump has blamed on Canada, Mexico, and China. This sweeping tariff regime was a focal point of Trump’s campaign, and the world of trade has been anxiously waiting to see the extent to which these promises will materialize.

The newly announced policies show that, if nothing else, Trump’s administration knows how to make tariffs effective, hitting Chinese importers where it hurts. The news of the removal of the de minimis sent Temu’s parent company’s stocks tumbling by 6%, with a similar impact felt by fellow low-cost retailers Shopify, Alibaba, and JD.com. 

While in the long term, increasing the price of Chinese imports could boost domestic production, it is likely to leave many Americans priced out of key consumer goods: research has found that the removal of the de minimis will disproportionately impact the poorest section of the population, who form the bulk of Temu’s and Shein’s customers and rely on them for many basic goods.  

The move signals an important shift, from just enacting blanket tariffs to physically stopping goods from moving around and broadening the scope of the measures to target even the smallest shipments. This shows a continued commitment by the US to curb Chinese imports, and could bring the world closer to a trade war between the two largest global economies.

While promised tariff hikes on many US allies have either failed to materialise – as on the EU – or been postponed thanks to negotiations – as Canada and Mexico – today’s announcements show that Trump’s China tariff regime is alive and well. Beijing has already responded to the initial tariff announcement with tariffs of 15% on US coal and 10% on other industrial goods like agricultural machinery and cars and could retaliate to the new measures with higher or broader-sweeping tariffs. However, as Maersk’s continued confidence in global trade shows, it is far too early to make significant predictions about the effect of any of these tariffs on consumer demand and measure their effect on world trade.

The Trump administration’s aggressive protectionist measures show not just its commitment to sticking to its promised tariffs, but should also serve as a warning to exporters everywhere that trade barriers come in many forms, and can be manipulated in more than one way. 

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• US President Donald Trump has announced a 25% tariffs on imports from Canada and Mexico, to which Canada has retaliated with a 25% tariff.
• The US has also placed a 10% tariff on Chinese imports, mediating from the promised 60% figure.
• Trump has warned of similar measures for the EU.

Some speculated, and others hoped, that Donald Trump’s promises of brutal tariffs were merely an election-winning tactic to frenzy his domestic fanbase. But on 1 February 2025, less than two weeks into his presidency, it transpired that Trump was being serious. Executive orders signed on Saturday imposed a 25% tariff on imports from Canada and Mexico and a 10% levy on goods from China. These tariffs will take effect from tomorrow, 4 February.

On Sunday night, 2 February, Trump promised that tariffs on the European Union (EU) would “definitely happen” and “it’s going to be pretty soon.”

Trump posted this executive order by invoking the International Emergency Economic Powers Act (IEEPA), which grants the president authority to regulate international commerce in response to a declared ‘national emergency’. 

IEEPA was first used by then-President Jimmy Carter in 1977, in response to the Iran hostage crisis. During his first term, Trump threatened to impose tariffs on Mexico in response to the “illegal migration crisis”, which he backed down from in June 2019, but he did use the IEEPA against Venezuela and Iran.

This time, Trump said the flow of “illegal aliens and drugs” – referring to 21,000 pounds of fentanyl apprehended by the Customs and Border Protection (CBP) in the last fiscal year, and “more than 10 million” illegal immigrants entering the US under Biden – constitutes a national emergency. But the sanctions are incommensurate with the crime, particularly on its northern border, through which less than 1% of illegal immigrants entered the US, and where just around 1% of the US’ fentanyl encounters take place.

Canadian Prime Minister Justin Trudeau has already imposed a 25% reciprocal tariff on American goods, and Mexican President Claudia Sheinbaum, ministers across EU countries, and China have all vowed retaliation. “It’s important that we don’t divide the world with numerous tariff barriers,” said German Chancellor Olaf Scholz, promising a collective response. “[The EU is] a strong economic area and has its own courses of action.”

Trump admitted on Sunday that there may be “some pain” from his tariffs, “but […] it will all be worth the price that must be paid.” Trade wars rarely have victors, but those who suffer the most are invariably the poorest. 

The North American retaliation

Sheinbaum “categorically reject[ed]” Trump’s assertions in his IEEPA declaration, pointing out that the Mexican government has “seized more than 40 tons of drugs in four months, including 20 million doses of fentanyl”, and “arrested more than ten thousand people linked to these groups”.

Sheinbaum said, “I instruct the Secretary of Economy to implement plan B that we have been working on, which includes tariff and non-tariff measures in defence of Mexico’s interests.”

Retaliatory tariffs in the USMCA region is no new phenomenon. The softwood lumber dispute between the US and Canada lasted from 1982 to 2014, and is based on the countervailing duties (CVDs) placed by the US on imports of this wood to Canada; the British Columbia region reported the loss of nearly 10,000 jobs as a result between 2004 and 2009.

This time around, Trudeau has targeted American alcohol, fruits and vegetables, household appliances, and clothing items.

The US has decided to impose a reduced 10% tariff on Canadian energy imports, rather than the full 25% rate, designed to help limit potential increases in consumer energy costs. Despite this measure, analysts project that US consumers could still face fuel price increases of up to 50 cents per gallon. Simultaneously, the automotive industry will also likely take a hit, considering that about 50% of auto-part imports in America come from Canada and Mexico, and about 75% of American exports go to its neighbours.

Nonetheless, Canada and Mexico are heavily dependent on the US market: Canada sends 78% of its annual exports ($567 billion), and Mexico 80% ($593 billion), to the US. However, the US maintains a more diversified import portfolio – of its $3.17 trillion in annual imports, only about 14% comes from Canada and 15% from Mexico. This imbalance may give the US more flexibility in its trade options and potentially stronger negotiating power with its North American neighbours. Already, in currency markets, the Mexican peso fell by almost 3%, and the Canadian dollar hit its lowest level since 2003. 

China countermeasures

Similarly, while retaliatory tariffs are a common feature of US-China trade relations, they have never been this severe. During Trump’s first term, $370 billion worth of Chinese imports were affected by tariffs, a figure set to increase with the additional 10% rate. But this differed from the 60% he touted on the campaign trail—probably because the Chinese capacity for retaliatory tariffs poses a significant threat.

An interesting feature of Chinese retaliatory tariffs is their targetedness, as we are now seeing in Canada. In 2018, Trump announced tariffs of 25% on steel and 10% on aluminium imports from China; in response, China levied a series of 15% to 25% tariffs on agricultural imports. By 1 September 2019, the number of US agricultural tariff lines with Chinese retaliatory tariffs increased to 1,053. 

This move was strategically against American farmers (a key demographic of Trump voters). In the short run, the downward pressure on US farm incomes triggered ‘trade aid’, federal assistance for the sector. And trade networks meandered around obstacles, as China began to rely on other southern allies for agricultural products, from soybean and pork to cotton and tobacco.

China’s Imports of Agricultural Products, 2014-2018, in Nominal Billions (B) of US Dollars. Source: Congressional Research Service

Today’s macroeconomic landscape mirrors this but renders it much sharper. China’s Belt and Road Initiative, a series of urbanising initiatives across the developing world, has tied the country to the fortunes of these nascent trading hubs. The South-South rerouting is underway; this time, retaliatory tariffs may even cut the US out of the equation altogether.

—

Mark Carney, former Governor of both the Bank of Canada and the Bank of England, warned that the proposed tariffs would hamper economic growth while stoking inflation. “They’re going to damage the US’s reputation around the world,” said Carney, who is currently among the contenders to succeed Trudeau as leader of Canada’s Liberal Party.

The UK’s Prime Minister Sir Keir Starmer and Foreign Secretary David Lammy are modulating their stance to shield the UK from such measures. For now, Trump has said of Starmer that “we’re getting along very well, we’ll see whether or not we can balance out our budget”. Chris Southworth of the International Chamber of Commerce UK said on LBC Radio that the UK could serve as a “pragmatic bridge”, a broker of conversation between the US and Europe. But complacency is a weakness when dealing with someone so volatile and impulsive.

Is this just a calculated move to demonstrate resolve? If so, it’s a risky gambit that could destabilise the global economy. But the US would do well to consider how many opponents it can afford to make because if the world of trade and trade finance is anything, it is malleable.

The post The Trump tariffs begin appeared first on Trade Finance Global.

December saw the trade surplus reach a monthly record of $104.8 billion, up from $97.4 billion in November. Exports rose 10.7% year-on-year while imports grew just 1%. The widening gap has prompted accusations from trading partners that Chinese surpluses are unsustainable and risk deindustrialising other economies.

The surplus, which eclipsed previous records, was driven by a sustained export push that saw Chinese manufacturers step up shipments to offset weak domestic demand. More than a third of the surplus came from trade with the US, where the bilateral imbalance grew 6.9% to $361.03 billion.

China’s exports to the US as a share of total shipments had declined slightly to 14.7% in 2024 from 14.8% a year earlier.

Donald Trump, who takes office next week, has pledged tariffs of up to 60% on Chinese goods and a blanket 20% tariff on all US trading partners. Swiss bank UBS expects the China tariffs to reduce China’s GDP by 2.5 percentage points over the following 12 months.

Chinese manufacturers have increasingly diversified their export markets, with shipments to Southeast Asian countries rising to 16.4% of total exports in 2024, up from 15.5% in 2023. However, his strategy could face challenges if the US targets the re-routing of Chinese exports through regional partners.

Under President Xi Jinping’s push to develop “new productive forces,” China has become a leading producer of green energy products such as solar panels and electric vehicle batteries, surpassing Japan as the world’s largest car exporter.

With global trade uncertainties likely to pick up as new tariffs take place, the front-loading boost may fade and more policy support will be needed to boost domestic demand.

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