President Donald Trump’s tariffs have sent shockwaves through the global trading system, raising alarms far beyond US-Canada relations. The ripple effects are poised to reshape international trade, causing unprecedented disruptions.

With 15% of global imports historically directed to the US, the nation has long been the world's top consumer market, thanks to its low average tariffs of just 3.3%. However, that era is over. As of April 2, Trump catapulted the average tariff rate to an astonishing 22%, the highest among major economies.

A Tariff Wall Like Never Before

Though the US has temporarily suspended reciprocal tariffs for most nations except China, it still maintains a 10% baseline rate along with various sector-specific duties—forming a tariff wall that hasn't been seen for generations.

The Ripple Effect from China

China’s major role in this upheaval can’t be overlooked. In 2024, the country exported a massive $438.9 billion worth of goods to the US, many of which entered duty-free under the $800 de minimis threshold via e-commerce platforms. But on April 2, Trump scrapped that exemption for low-value Chinese exports and slapped a staggering 34% tariff on all imports from China.

Retaliation from China further escalated the situation, leading to total effective tariffs exceeding 100% on numerous items, making it exorbitantly costly for Chinese exporters.

Southeast Asia Bearing the Brunt

The last time US-China tensions rose, many Chinese goods rerouted through Southeast Asia. Unfortunately, this time Southeast Asian economies, including Vietnam—who exported $137 billion to the US in 2024—are feeling the strain too. Although the 46% reciprocal tariff against Vietnam has been suspended, the US isn't likely to overlook bypassing those tariffs again.

A Historical Echo of Protectionism

The looming global trade crisis echoes the Smoot-Hawley Tariff Act of the 1930s, which led to a catastrophic contraction in world trade. In those days, it wasn't just the US that retaliated; allied nations began imposing their own tariffs, leading to widespread economic stagnation.

A Tenuous Global Situation

Today’s situation is arguably more precarious. Western policymakers have been raising concerns over 'Chinese overcapacity' for years, fearing that excessive Chinese exports coupled with unfair practices could destroy local industries. Indeed, governments like Canada have already implemented stringent tariffs, further tightening the screws.

Trade at a Critical Juncture

As this Great Trade Diversion deepens, it puts existing global trading systems under immense pressure. While there remains an opportunity for nations to reinforce their commitment to international trade rules, the temptation toward protectionism is also dangerously high. Countries might find themselves erecting illegal trade barriers in response to an influx of imports.

The world stands at a critical crossroads. One path could lead to renewed international cooperation and adherence to trade rules; the other risks cascading into a torrent of protectionist measures that could erode decades of economic growth and stability.