📝Trade Composition Is Shifting Significantly: Barclays

The composition is shifting significantly. For example, many of the US's major trading partners, including Japan, Korea, China, Canada, and the EU5, have reduced exports to the US.

Instead, they have diverted them to other destinations, and overall exports actually grew. Mexico and Vietnam stand out as exceptions. Mexico has increased its exports to the US, likely benefiting from favourable tariff treatment under the USMCA, which gives it a pricing advantage over other emerging market producers. Vietnam's export growth may reflect transshipment or substitution effects, particularly as firms seek alternatives to Chinese sourcing.

These shifts could have far-reaching implications. For instance, many have speculated that the diversion of trade away from the US and to other developed markets could be a disinflationary impulse; easing import price growth (beyond just energy) across developed markets year-to-date supports this hypothesis. Separately, these patterns also reveal potential pain points, such as a significant renegotiation of the USMCA (whose review starts this autumn and needs to be completed by 1 July 2026) or crackdowns on transshipment practices.- Barclays