US President Donald Trump’s trade policies continue to stir global markets, with his threats of imposing tariffs targeting key trading nations. As trade deficits grow, countries such as China, Mexico, and Canada are facing the brunt of the administration’s economic manoeuvres. This article examines the rationale behind the tariffs and identifies which countries are most exposed to their effects.
The US Trade Deficit and Tariffs
In 2024, the United States faced a record trade deficit of over $1.2 trillion in goods, despite a surplus of nearly $300 billion in services. This imbalance arises from the US importing far more than it exports. President Trump has responded by imposing tariffs on countries with large trade surpluses with the US, seeking to reduce the deficit and bring economic benefits back to American producers.
According to the US International Trade Administration, China and Mexico represent the largest trade deficits for the US. In 2024, the US recorded a $296 billion deficit with China and a $172 billion deficit with Mexico. The Trump administration’s tariffs have targeted these countries, with the president also threatening tariffs on the European Union.
Impact on Trade Relationships and Key Sectors
Canada and Mexico, two of the largest exporters to the US, would be among the most affected by the tariff strategy. According to data, 80% of Mexico’s exports and 78% of Canada’s exports are destined for the US, highlighting the economic dependency of both nations. The imposition of tariffs could significantly disrupt their economies, particularly in sectors like automobiles, oil, and machinery.
While both countries have long enjoyed preferential trade agreements such as NAFTA (replaced by USMCA in 2020), the import taxes introduce new complexities. China, with its retaliatory measures, faces tariffs primarily affecting electronics and machinery.
The decline in the US’s reliance on Chinese imports — dropping from 21% in 2018 to 14% in 2023 — signals broader shifts in the global supply chain.
The European Union, while less directly dependent on US trade, faces potential harm due to its interconnectedness with other economies. Countries like Germany and Ireland, which export billions of dollars’ worth of goods to the US, would be particularly exposed if tariffs were extended to the EU.
The Trump administration’s tariffs are creating uncertainties for global trade. While Mexico and Canada face immediate risks, countries like China and the EU could also experience indirect consequences due to interconnected supply chains.
