China, the European Union, Mexico, and Canada are among the many United States’ largest buying and selling companions and a few of the most vocal opponents of the brand new tariffs. Their leaders and residents attempt to create the phantasm that they’ll do with out the U.S. as a shopper, however the actuality is completely different.
There isn’t any different market able to changing the American client. These international locations already commerce globally, and there’s little room for world demand to develop sufficient to offset misplaced exports to the U.S.
Their dependence extends past commerce. They rely closely on entry to U.S. {dollars}, U.S. funding, and overseas funding aimed toward serving the American market. Europe has lengthy trusted U.S. navy safety. Now, because the U.S. steps again and calls for they defend themselves, these nations face the added burden of increasing their very own navy capabilities, additional straining their economies.
In 2024, the USA imported about $438.9 billion in items from China, representing roughly 2.7% of China’s GDP. Many U.S. and overseas corporations working in China, primarily to fabricate items for export to the American market, are more and more leaving, relocating to Southeast Asia or returning to the U.S. With many Southeast Asian international locations now additionally dealing with tariffs, this pattern is pushing corporations to take a position immediately in U.S.-based manufacturing to take care of market entry.
China’s dependence on the U.S. greenback is underscored by its $3.34 trillion in overseas trade reserves, with analysts estimating round 50% are held in U.S. dollar-denominated belongings. This reliance is bolstered by the Folks’s Financial institution of China’s administration of the yuan, successfully pegged to the U.S. greenback inside a ±2% buying and selling band.
Moreover, China is the world’s largest importer of vitality and uncooked supplies, practically all priced and settled in U.S. {dollars}. Regardless of efforts to internationalize the yuan, its acceptance stays restricted. Outdoors of bilateral offers with Russia, even fellow BRICS nations want to transact in U.S. {dollars}.
In 2024, the European Union exported about $571.1 billion in items to the USA, accounting for roughly 3.0% of EU GDP. The U.S. is the EU’s largest export market, with many EU-based corporations producing items particularly for American shoppers. The US had a commerce deficit of roughly $217 billion with the EU in 2024.
The EU additionally relies upon closely on U.S. overseas direct funding, the bloc’s largest supply of capital influx. American corporations account for over 30% of acquisition exercise and 36% of greenfield investments throughout member states. These hyperlinks help employment and industrial output throughout Europe.
As of early 2025, the EU held round $297.5 billion in overseas trade reserves, dominated by U.S. {dollars}. Although the euro is a world reserve forex, many European central banks and monetary establishments preserve important USD reserves for commerce, vitality, and monetary stability.
Since World Struggle II, the U.S. has successfully backed Europe’s protection, carrying nearly all of NATO’s navy burden. Most European international locations have failed 12 months after 12 months to fulfill the two% of GDP protection spending requirement, releasing up sources for home social packages. Now, with the U.S. stepping again from its conventional protection function, Europe faces a pointy adjustment. Nations might want to redirect extra funds to protection, seemingly resulting in declines in residing requirements and, in lots of circumstances, the reinstatement of conscription.
In 2024, Mexico exported about $505 billion in items to the USA, making up 30% of Mexico’s GDP. The U.S. is by far Mexico’s most necessary commerce accomplice, with the overwhelming majority of its manufacturing and agricultural exports destined for the American market. In flip, the USA recorded a commerce deficit of round $152 billion with Mexico in 2024.
Many overseas and U.S.-based corporations function in Mexico underneath maquiladora and nearshoring fashions, manufacturing items particularly for export to the USA. This has lengthy allowed firms to profit from Mexico’s decrease labor prices whereas avoiding U.S. tariffs underneath commerce agreements. In recent times, China and European nations have sharply elevated funding in Mexico, aiming to make use of the nation as a base for tariff-free entry to the U.S. market underneath the United States-Mexico-Canada Settlement (USMCA).
Formally, Mexico reported about $5.6 billion in Chinese language FDI in 2023, however impartial estimates counsel the true determine could exceed $13 billion when oblique investments by means of intermediaries are included. A lot of this capital targets automotive and electronics manufacturing, with $2.72 billion in new Chinese language auto-sector investments alone in 2023. In the meantime, the European Union stays one among Mexico’s largest traders, with EU-held funding inventory totaling about $210.6 billion.
Nevertheless, the growth of U.S. tariffs underneath President Trump’s second time period has closed this loophole, successfully ending overseas corporations’ skill to take advantage of Mexico as a backdoor into the American market. These tariffs not solely disrupt Mexico’s export sector however are additionally anticipated to discourage future funding, significantly from China and Europe, inflicting broader GDP losses past the speedy commerce impacts.
The US can also be Mexico’s largest supply of overseas direct funding, contributing over $16 billion in 2024. Mexico’s overseas trade reserves reached $232.2 billion in late 2024. Whereas the Financial institution of Mexico doesn’t publicly disclose the precise forex breakdown, it’s extensively understood that U.S. {dollars} comprise the bulk, given Mexico’s deep financial integration with the USA.
In 2024, Canada exported about $412 billion in items to the USA, accounting for roughly 77% of Canada’s exports and 19% of its GDP. The US can also be Canada’s largest supply of overseas direct funding, accounting for 46% of complete FDI, amounting to $438 billion as of 2022.
Canada’s overseas trade reserves reached $110 billion in 2023, most of that are assumed to be held in U.S. {dollars}, reflecting Canada’s deep financial integration with the USA.
In recent times, China has strategically invested in Canada, aiming to leverage Canada’s entry to the U.S. market. As of 2024, Chinese language FDI in Canada totaled about $27.4 billion, concentrated in sectors like mining, expertise, and manufacturing.
The underside line is that every of those international locations—and the European Union—are much more depending on the USA than they’re prepared to confess. Recognizing this, President Trump has raised tariffs to historic ranges as a way of forcing them again to the negotiating desk and securing a greater deal for the American folks.
