Market Update: How Trump’s tariffs have reshaped the global economy, in 11 charts – Full Analysis

U.S. President Donald Trump returned to power promising to shatter the global economic order and restore his country’s industrial greatness.

His tool of choice: tariffs.

On March 4 last year, Mr. Trump hit Canada and Mexico with so-called “fentanyl tariffs” and raised them on China, part of his ill-fated use of the International Emergency Economic Powers Act to impose duties. For the rest of the world, it was a glimpse of the bombast, insults and grandiose promises to come a month later on Liberation Day, when U.S. tariffs truly went global.

Over the subsequent year, the global economy has been transformed by shape-shifting U.S. trade policies. Just not in the ways Mr. Trump envisioned.

How Trump plans to continue his trade war with Canada without IEEPA

Case in point: the President pledged to reverse the U.S. trade deficit, a key justification for his use of emergency tariffs. Instead, the United States posted its largest goods trade deficit on record in 2025.

True, the deteriorating trade balance was partially a reflection of goods flooding into the U.S. before tariffs took effect. But those efforts were in direct response to the chaos Mr. Trump’s duties were sowing. And with the administration vowing a new wave of tariff measures to replace IEEPA duties – the U.S. Supreme Court ruled against them on Feb. 20 – a repeat this year is entirely possible.

Here are 11 ways the President who bills himself as Tariff Man has already changed the global economy.

U.S. tariff rates are way higher – but with significant variation by country

Since Mr. Trump’s return to office, U.S. duty rates have been on a chaotic ride that’s taken them to the highest levels in decades. China is getting hit hard, although the current scenario is much improved from last spring, when both countries briefly imposed triple-digit tariff rates on one another. Canada and Mexico are at the other end of the tariff spectrum because they enjoy broad exemptions when satisfying rules-of-origin requirements under the U.S.-Mexico-Canada Agreement (USMCA), the North American trade pact.

U.S. trade representative says deal with Canada must include higher tariffs

While the U.S. is keen to erect trade barriers, most other countries have not retaliated with tariffs of their own – whether imposed on the U.S. or other partners. The global effective tariff rate has barely risen and sits around 2 per cent, according to calculations from Capital Economics. And that’s helping to keep global shipments flowing, despite all the tariff drama.

The U.S. is retreating somewhat from global trade, and other countries are picking up the slack

Before the trade war kicked up last spring, U.S. importers rushed to get products into the country. Since then, trade with the U.S. has been muted. But elsewhere, shipments are growing robustly. China continues to increase its share of global trade volume, in part because of steep discounting, while other parts of Asia (such as Vietnam) have become even bigger suppliers of manufactured goods.

In 2025, Canada saw its exports to the U.S. fall by 5.8 per cent from the previous year, according to Statistics Canada. But exports to the rest of the world jumped by 17.2 per cent – albeit with a big, golden asterisk. (More on that later.)

Tariffs helped the U.S. narrow trade deficits with some countries, but worsened others

The U.S. ended 2025 with a record US$1.23-trillion trade deficit with the world as a whole, undermining Mr. Trump’s claim that tariffs would bring balance to U.S. trade flows. But below the surface significant shifts are under way. With the White House aiming its steepest tariffs at China, continuing a strategy launched under the first Trump administration and maintained by president Joe Biden, the U.S. trade deficit with China shrank as imports from that country dropped 30 per cent from the year before to US$308-billion, the lowest level since 2009 in nominal terms.

The U.S. trade deficit with Canada also narrowed, albeit slightly, but the trade balances with Mexico, Vietnam and Taiwan all deteriorated as those countries picked up the slack supplying cheaper goods to U.S. consumers – hence the occasional suggestions from Trump administration officials that American children should make do with fewer dolls and pencils.

Canada has suffered more than Mexico from tariffs

The only three countries that faced “fentanyl tariffs” have been hit in very different ways, with Mexico emerging the clear winner. It was widely expected that shipments from China would drop in the Trump 2.0 trade war, but the divergence between Canada and Mexico has surprised many, since both countries enjoy the same protections under the USMCA trade deal. While U.S. imports from Canada fell 7 per cent last year, according to the U.S. Census Bureau, Mexico shipped more goods to the U.S. than ever before.

Mexico’s lower labour costs explain part of the trend. But one sector in particular is pushing Mexico higher: computing equipment. In 2025 the U.S. bought close to US$90-billion of laptops, desktops, servers, CPUs, hard drives and other gear from Mexico, up nearly 90 per cent from the year before amid the U.S. data centre boom.

Tariffs have led to higher prices

On the surface, it doesn’t look as if U.S. duties have created a new wave of inflation. (The U.S. Consumer Price Index rose by 2.4 per cent annually in January, although some inflation metrics are running a touch hotter.) But there’s plenty of research to suggest that price increases are stronger than they otherwise would have been, particularly for durable goods – think vehicles, furniture and sports equipment – that are frequently sourced from overseas.

What happens to the billions of dollars in tariffs the U.S. collected?

In October, researchers at the Federal Reserve Bank of St. Louis wrote that prices for durable goods “have increased noticeably. These price movements align with the timing of tariff hikes” in 2025. Many companies that initially absorbed tariff costs are now passing them on to consumers, according to the Fed’s latest Beige Book report, in part because of pressures to sustain profit margins.

Canada has lost a lot of manufacturing jobs, but so has the U.S.

Mr. Trump has long blamed free trade for the decline of factory employment, and he promised that tariffs would reverse that trend by forcing companies to shift their operations to American soil. There is plenty of anecdotal evidence companies are opening new plants in the U.S. instead of Canada or moving production south of the border – for example, the Big Three U.S. automakers. But that has done nothing to reverse U.S. manufacturing job losses.

Payroll employment numbers in both countries show manufacturing employment fell throughout 2025 in Canada and the U.S. If anything, for many months the losses in the U.S. were more severe. That’s because tariffs can have the opposite effect of what Mr. Trump intends. The same pattern played out during his first presidency. Tariffs on steel and aluminum allowed U.S. metals producers to ramp up prices and production. But that has a negative knock-on effect for customers who need to buy that steel and aluminum, and they are forced to cut costs. As it stands, automakers have already warned tariffs are adding billions to their costs.

Canadian investment in the U.S. cratered last year

With Mr. Trump throwing up trade barriers to curtail imports from Canada, Canadian companies and major investors curtailed their investments in the U.S. sharply. Southbound direct investment fell 65 per cent to $27.6-billion in 2025, the lowest level since 2013, as the uncertainty around trade made capital investment decisions more fraught. That said, U.S. investment into Canada was more or less unchanged from last year, a rare bright spot for the Canadian economy.

While Canadian investment flows to other countries also dropped last year, it was a much smaller decline, and in line with recent years. As the Canadian government pursues closer economic ties with other countries, the flow of non-U.S. inbound and outbound investment this year will be an important measure of that strategy’s success.

Canada is diversifying its trade partners, but soaring gold prices are doing the heavy lifting

With Canada’s export sector under fire from tariffs, the U.S. share of Canadian exports ended last year at 67.3 per cent, the lowest level outside of the start of the COVID-19 pandemic since at least 1997, when Statscan’s records begin. The drop in shipments to the U.S. is one reason, but at the same time Canadian exports to the rest of the world jumped more than 17 per cent, suggesting a strong victory for Canada’s diversification efforts.

While some types of goods did find their way to non-U.S. destinations in greater numbers, namely oil, Canada’s trade diversification champ was gold, as a result of soaring prices. Once gold is taken out of the picture, the gains in Canada’s non-U.S. share of exports vanishes. It’s a reminder of the difficult challenge that Canadian businesses face in finding new markets.

U.S. equities have gone from world-beaters to world-laggards

During his State of the Union address, Mr. Trump rolled out one of his favourite talking points: stock market performance under his presidency. “All-time record highs since the election. Think of that. One year. Boosting pensions, 401(k)s and retirement accounts with millions and millions of Americans. Everybody’s up, way up.”

What he didn’t mention is that those Americans would have been much better off putting their money into non-U.S. markets. The performance of world equities trounced U.S. stocks last year, and the same trend is under way to start this year. It’s a stark reversal of performance from the previous decade, when global markets lagged the U.S., and it reflects both the weakened U.S. dollar and the wariness of investing in U.S. assets in a time of so much policy uncertainty in Washington.

Companies are finding ways to minimize tariff costs

In a year when a lot of Canadian exports to the U.S. struggled, one product category thrived: 9802, a special provision of the complex tariff classification system that covers articles of U.S. origin that are shipped out of the country for minor alterations or processing. Last year 9802 shipments from Canada nearly doubled to US$2.5-billion, and in the fourth quarter they accounted for the largest dollar-value increase from the year before of any U.S.-bound export commodity.

Part of Chapter 98 of the U.S. Harmonized Tariff Schedule, which allows companies to reduce or eliminate tariffs in certain circumstances, 9802 has become popular with companies in the steel and aluminum products sector. (For example: a U.S.-made steel coil that gets shipped to Canada to be split and covered in a protective plastic coating and then returned to the U.S. to be manufactured into something.) That sector has been targeted by tariffs under Section 232 of the Trade Expansion Act of 1962, and the sector doesn’t qualify for a USMCA tariff exemption, leaving companies to scramble for shelter elsewhere. As Mr. Trump pursues other tariff measures to replace the IEEPA tariffs this year, the arms race to mitigate those duties will continue.

Americans aren’t happy about economic policy

The Trump administration isn’t getting high grades for its chaotic approach to policy making. Survey data from the University of Michigan suggest that U.S. households have rarely felt so pessimistic about economic policy in the last five decades. (Respondents are asked about the government’s efforts to fight inflation and unemployment.)

With the U.S. midterm elections this fall, and Americans still aggrieved by pocketbook issues, the Republicans will be facing heat over tariff costs that are passed on to consumers.