MANY FEAR that a new cold war between America and China could divide the world economy into rival geopolitical camps. But President Donald Trump’s recent tariff threats defy geopolitical logic, hurting both friends and foes. He will hit China with an additional 10% duty, on top of existing tariffs, and he is itching to impose a steep 25% duty on America’s two close neighbours, Mexico and Canada. (On February 3rd Mr Trump announced that the tariffs on Mexico and Canada would be paused for one month.) The levies are meant to punish the three countries for their trade surpluses with America and their failure to stop the flow of illicit drugs into the country.
Many Canadians see this bullying as a betrayal of their country’s loyalty to their ally. The strength of such ties is not easy to measure. But now that geopolitics and economics are inseparable, students of international trade must try. One convenient quantitative indicator is how a country votes at the United Nations. In 2022, for example, China voted with America only 33% of the time on important, contested resolutions in the General Assembly, according to America’s state department. For Mexico the figure was 69%; for Canada 98%.
Based on assembly voting patterns from 2005 to 2022, the McKinsey Global Institute, a think-tank, has mapped countries on a geopolitical scale from zero to ten. America stands at one end of the scale, Iran at the other. This simple measure then allows them to calculate the geopolitical “distance” spanned by trade. When America imports from its Australian ally, for example, the goods must cover a vast geographical distance of over 12,000km. But measured on a geopolitical yardstick, the distance between the two countries is short: only 0.2 on McKinsey’s scale. The gap between America and Canada is similarly small. Mexico is a bit further off on the geopolitical map, at 3.9 out of 10. China lies near the opposite end of the scale, at 9.6 (see chart 1).
The report, which was published before Mr Trump’s latest tariff decisions, points out that trade is spanning greater geographical distances, but shorter geopolitical ones (see chart 2). The average dollar of trade travelled 5,200km in 2023, roughly the distance between London and Boston. For all the talk of nearshoring—the idea that production can be brought closer to home—the geographical distance has been growing, slowly but steadily, by about 10km a year over the past decade.
Evidence of friendshoring, however, is easier to find. The average geopolitical distance of trade has fallen from a peak of about 3.5 in the early 2010s to 3.1 in 2023. On the institute’s scale that is roughly the distance between America and Turkey, or between China and Tunisia.
Europe has cut the geopolitical distance of its trade by curtailing its dealings with Russia. Instead, China now imports large amounts of energy from Russia and exports hundreds of thousands of cars to it. China is trading less with a hostile West and more with countries in the middle of the geopolitical map, especially in South-East Asia and Latin America. Indeed China now trades more with developing countries than it does with advanced economies.
America has reduced its imports from China in recent years, replacing them with purchases from Mexico and other countries in Asia. But it is not easy to cut the world’s biggest manufacturer out of international supply chains. Many of the goods America now buys from non-Chinese sources contain parts and components that still originate in the country. According to the report, China accounts for about a quarter of the value of the electronic goods that America buys from Vietnam.
How would trade distances be affected by Mr Trump’s new tariffs? The barriers aim to replace imports with American goods. But the duties—and the retaliation they invite—would also divert trade to other countries. Since Mexico and Canada share borders with America, any alternative partners would be farther away geographically. They would probably be more diplomatically distant, too. The 25% tariffs could even divert some trade back to China, given that its tariffs have increased by only 10%.
The ramifications could extend further. Mr Trump’s folly will not only influence how trade flows across existing geopolitical lines; it will also affect those alignments themselves. Countries now know they cannot rely on America as a credible trading partner. Some middle-of-the-map nations may build closer ties with other economic powers instead. America’s friends and allies will also feel newly estranged from the country. Even before any extra duty is charged, the tariffs have increased the geopolitical distance of trade—because they have widened the diplomatic gap between America and everyone else.■
Editor’s note (February 3rd, 2025): This piece has been updated to include the news that tariffs on Canada have been paused for 30 days.