When it comes to U.S. trade alliances, a monumental shift has emerged. Previously, China was the prominent figure in the roster of U.S allies. Nowadays, however, it has receded to third place, bearing closer resemblance in trade percentage to the world’s other nations rather than competitors Mexico and Canada. In fact, the percentage of total U.S. trade with China dropped to 5.89% in May, its lowest proportion in over two decades.
The question that arises now is whether this overhaul is a result of President Trump’s imposed tariffs or an unfolding of the ‘rules of origin’ manipulation technique. Regardless of the cause, the shake-up is undeniable and impressive. Back in the days when President Trump first assumed office, China was responsible for 17.77% of all U.S. trade, a volume threefold as great as the present value.
The transformation didn’t plateau there. Not long after, President Trump ignited a trade war that was passed on, and even amplified, under President Joe Biden’s term causing inevitable alterations in U.S. international trade dynamics. The supposed objective at the core of Trump’s strategy was to trim down the U.S. merchandise trade deficit on a global scale.
Sadly, the outcomes haven’t been as anticipated. Rather than shrinking, the U.S. trade deficit has escalated over six of the past eight years, surpassing the $1 trillion mark during the most recent quartet of years. The situation has essentially morphed as opposed to improved – what once was a trade deficit with China towering over that of any other country fivefold, has now been leveled down.
Presently, China’s deficit is marginally higher than that of Mexico’s and it falls short of the combined deficit between the U.S., Mexico and Canada – a first note in decades. As the trade deficit siwh China has sunk by 29.37%, a compelling incline has been observed in trade deficits with primary trade partners, presenting some startling numbers.
For instance, the deficit with Mexico has surged by 121.08%. Canada comes next with a trade deficit leap of 240.67%, followed by South Korea experiencing an ascending trajectory of 268.33%. Taiwan and Vietnam have observed even steeper rises of 385.39% and 212.85% respectively.
Speculations spread that these skyrocketing figures were in part due to China’s exploitations of the system to amend its “country of origin” label in order to spare itself from thorny U.S. tariffs. This allegedly took place via re-routing trade through Vietnam and other countries.
Such manipulation might be explainable when we consider the approximately hundred nations with whom the U.S. enjoys a trade surplus. These strained trade relations could be construed as a side effect of this ongoing trade war.
An additional aftermath of the trade war is the debilitated relations with U.S. allies, which are faring under great stress. In contrast to the soaring deficit, an important metric has displayed a decline – the percentage of U.S. trade when set against an import. This value has notably plummeted, sticking to historical trends, even as the deficit burgeoned.
Currently, China is acknowledged as the third most significant trade partner of the U.S., trailing behind leaders Mexico and Canada. So much so, that it’s closer in trade percentage to a plethora of other world nations than the top two contenders.
At the outset of Trump’s first term, China was at the apex of U.S. imports, bagging more than 20% of the total. However, it has failed to maintain this status quo since 2018. Nowadays, Mexico and Canada are the countries occupying the top slots, pushing China back to third place.
This continual evolution marks a striking contrast when we compare the first five months of 2025 and the corresponding period in 2018. U.S. imports from China have dipped to the tune of 27.55%, whereas global imports have soared to 47.29%. The export rates have similarly taken a downturn.
The swing in China’s portion of U.S. trade between Trump’s inaugural term and the early stages of his second is tremendous. The upshot of this shift is that despite the decline in percentage, the U.S. deficit has pursued an upward trajectory.
Ultimately, a drastic transformation has swept through the U.S.-China trade landscape – a repositioning in the trade partner rankings, a shift in trade percentages, an upheaval in the balance of trade. A consequence of policy changes, strategic maneuvers, an evolving global economic scenario, or perhaps, all of these factors combined.
Critics may argue about whether these shifts spell good news or not. Have the strategies employed to reduce the merchandise trade deficit delivered results? Or have they led to an alteration of the trade landscape without substantial gain? The specter of a widening U.S. trade deficit and strained relations with major trade partners isn’t showing signs of receding any time soon.
And as we continue to grapple with these international economic shifts, it serves to remind us of the dynamic and unpredictable nature of global economies. Co-existing with these fluctuations while also attempting to control or steer them might be the greatest challenge of modern trade policies. This intense ‘trade game’ remains in perpetual motion.