Weekly Market Update

The Importance of Global Trade

The US is less reliant on global trade than Mexico and Canada, making it more insulated during trade disputes. While recent tensions have calmed, potential conflicts with Europe loom, suggesting that the situation could escalate again in near future.

10 February 2025 5 min read

Dane Smith

Head of North American Investment Strategy & Research

Chris Carpentier, CFA, FRM

Senior Investment Strategist

Maria Nikitanova

Investment Strategy and Research

Donald Trump hit the ground running in his first few weeks as US president, quickly imposing tariffs on Canada, Mexico, and China. Soon after their announcement, negotiations commenced and ended with a 30 day pause with Mexico and Canada. During the negotiations, both Mexico and Canada committed to reinforce the border and assist the US in its effort to clamp down on immigration and illegal drugs. The chart below may give us some insight as to why the response was seemingly rather quick.

Here we show the amount of global trade (imports plus exports) as a percentage of GDP for each of the countries. What becomes obvious here, is how dependent both Mexico (76%) and Canada (64%) are on trade, and how their overall economies rely on its success. Because of this dependence, they will have a heightened sensitivity to the health of global trade. Conversely, the US is somewhat of a closed economy, deriving only 25% of its GDP from trade, showing it may have less to lose.

The trade crisis has been averted – for now. Through all this, markets have been willing to generally stay calm and see through all the noise. However, this is only the beginning. While the most recent fight has been with the US’s closest neighbors, it is only a matter of time before the Trump administration turns its eyes to Europe, bringing another round of frictions.

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