The prices of American president Donald Trump shaken the world trading system. Canadians were rightly concerned about the devastating impact of the price of relations with the United States-Canada, but the wider effects of the undulations could be just as damaging.
The prices have redirected billions of dollars in exports to the United States, which are now ready to flood the world markets – including that of Canada. This will trigger a historic commercial diversion which will even put the most free of mind nations of free trade.
About 15% of global imports went to the United States in 2024. The country has long been the largest consumer market in the world, in part, due to its low rates of only 3.3%.
These days are now over. On April 2, the United States increased its average rate rate from seven to a step of 22% – by far the highest among countries with a large economy.
Even if the “reciprocal” prices of the United States has since been suspended for all countries, with the exception of China and Trump, smartphones, computers and micropuits, a reference rate of 10% and several sectoral tasks remain in place.
Together, they form a price wall around the United States, unlike all that is seen in generations.
The great diversion of trade
A large part of the commercial disturbances come from China. In 2024, China exported $ 438.9 billion in the United States. Millions of parcels, sent via electronic trade platforms like Shein, have entered the franchise of American rights because they fell below the “Minmis” threshold of $ 800.
On April 2, Trump eliminated this exemption for low -value Chinese exports and imposed a reciprocal rate on all Chinese imports of 34%.
This rate was further increased after China promised to retaliate on April 4 and is now stacked above a 20%fetanyl rate. The result is an effective rate rate exceeding 100%, making it prohibitive for China to export to the United States.
The last time the American-Chinese trade tensions have increased, China has reassured many of its exports via Southeast Asia. This time, however, the countries of Southeast Asia have also been hit hard.
Vietnam, a major Chinese foreign investment destination oriented to exports, exported $ 137 billion in goods in the United States in 2024. Although the reciprocal rate of 46% against Vietnam has since been suspended, the United States tolerated shortly this time.
The United States has also imposed a 25% rate on all imported cars. South Korea, Japan and Germany export all cars to the American market. Although some of these exports can continue because pricing costs are absorbed or transmitted to customers, others will divert their vehicles to alternative markets.
All in all, billions of dollars in commerce are being resettled, with a tidal wave of merchandise now to markets around the world.
Great Redux depression
The world has already been here. In the 1930s, the United States promulgated the Smoot-Hawley Tariff Act, which raised prices on thousands of imported goods in order to protect the American industries during the Great Depression. The result was a rapid contraction of global trade.
What finally overthrew the world above was direct reprisals against the United States instead, world trade collapsed while American trade partners turned against each other. Faced with a flood of diverted goods, they rushed to protect their own manufacturing by adopting their own commercial restrictions.
Likewise, today, we are faced with a similar risk. The greatest concern is not Trump’s prices themselves or even the reprisals they provoke, but rather the diversion of trade and the wave of protectionism that they can trigger.
Old fears, new pressures
In some respects, the world can be in a more precarious position today than in the early 1930s.
For almost a decade, Western decision -makers, including the G7 members, sounded ringtones on “Chinese overcapacity”. China consumes too little at home and exports too much abroad, often using non -commercial non -commercial practices such as the secret grant to compromise local prices.
The fears of deindustrialisation have already led certain governments to set up new commercial barriers. Canada, for example, has placed a 100% price on electric manufacturing electric vehicles to protect its own emerging industry in 2024. A flood of diverted Chinese imports will only increase these pre -existing concerns.
At the same time, the global trade rules intended to safeguard against protectionism have become brittle. The United States has blocked the appointment of judges before the highest court of the World Trade Organization, which is responsible for applying trade rules.
The resulting impunity has embarked by countries beyond the United States to openly flout the WTO rules. Indonesia, for example, continues to maintain an export prohibition at OMCO on nickel. Canada’s electric vehicle rate will probably be deemed illegal under commercial rules as well.
Global trade at a crossroads
The great hijacking should put a system already stretched to the test. There is still time for countries to reaffirm their commitment to the rules of international trade. These same rules also allow countries to temporarily restrict trade in the face of a flood of imports.
The Canadian government can proactively identify sectors at risk of disruption and use Canada’s border services agency to self-initiate surveys in vulnerable sectors in order to quickly erase procedural obstacles to impose temporary import restrictions.
If countries stick to these rules, the global trade system can resist the storm. As much as possible, however, is a shift to protectionism. Faced with a deluge of goods from China, the temptation to erect illegal trade barriers as the United States will already be high.
The global economy is at a crossroads: a path leads to a reaffirmation of international cooperation and global rules; The other has a cascade of protectionist measures and a weakening of the system itself which has enabled decades of economic growth and stability.
Wolfgang Alschner is Hyman Soloway President of Business and Trade Law, the University of Ottawa / University of Ottawa
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