The United States‘ trade policy has been highly unpredictable. The broader economic impact has been less negative than feared on ‘Liberation Day’ in April ’25, when U.S. tariffs dramatically escalated.
Broader global trade flows continued to rise in ’25. U.S. imports also increased while the U.S. trade deficit widened slightly despite these measures.
Canada posted its 1st per-capita gross domestic product increase in 3 years during ’25. The unemployment rate moved broadly sideways. Consumer confidence plunged during the spring. However, household expenditure held up. Also, net foreign direct investment was positive for the 1st time in more than a decade.
Under the visually seen surface, the impact has been significant. As such, specific sectors and regions targeted by tariffs have been hit hard.
Consumer spending has been resilient, while business investment has softened. Global trade flows have reoriented dramatically. The goal is to avoid higher-tariffed regions similar to China.
For all the announcements & noise, economies look remarkably similar overall. There are, however, important distribution changes. The past year also broadly confirmed that the world may be resilient to a U.S. trade shock, although Canada may still be highly dependent.
Continued reliance on the same playbook, which was used as tariff threats escalated early last year, to assess the fallout. Here are the key lessons learned from a year of trade shocks.
Global trade sustained itself during ‘25
The tariffs imposed during the second Trump administration were not only higher but also significantly wider in scope than the first. The new tariff covers more than 70% of total U.S. imports in ’24 at their peak.
For much of the world outside North America, the U.S. represents a smaller share of exports. This ranges from about 30% in Vietnam in ’24 to 15% for China, besides 9% for the euro region. Trade partners outside Mexico and Canada faced significantly lower exposure to U.S. tariffs due to their reduced reliance on the U.S. consumer market. Instead, they tend to be more exposed to the 7.9 billion non-U.S. global consumers.
