Exploration of Alternatives in Supply Chains

In 2020, Trump ended the North America Free Trade Agreement (NAFTA), which was signed in 1992 and came into effect in 1994. It was replaced by the United States-Mexico-Canada Agreement (USMCA).

Threats from Trump to impose tariffs on Canada and Mexico have put the USMCA at risk. Initially, tariffs on Mexico and Canada were announced, but they were later postponed for 30 days. Even if the postponed tariffs are not applied, due to the US's rapidly distancing stance from international cooperation, countries will develop new approaches in their trade policies, and companies will reconsider their supply chain strategies.

Firms from Asia, Europe, and many parts of the world had established supply chains in North America. Mexico had become a production hub for brands like Adidas, Samsung, Honda, Hyundai, Nestle, Volkswagen, Volvo, and Lego due to its cost advantages. The aim was to reduce dependency on China in supply chains. The COVID-19 crisis made firms realize that their reliance on China had reached undesirable levels. The trend to move away from China intensified during the COVID-19 crisis.

The trade wars initiated by Trump, who began his first term in 2017, led many companies to align with the US. In the process of repositioning supply chains, the idea of producing in Mexico and Canada became increasingly preferred due to proximity to the US.

In November 2024, Toyota announced it would invest an additional $1.45 billion in Mexico. Taiwan's Foxconn revealed in October 2024 that it would produce Nvidia chips in Mexico. Mexico surpassed China and Canada in US imports.

Europe-Latin America Axis

Apart from developments in North America, the US has begun to be perceived as a new threat in international trade, leading to shifts in the restructuring of supply chains.

On December 6, 2024, the negotiation process for an agreement between the Southern Common Market (MERCOSUR) and the European Union (EU) was completed.

The negotiation process between the EU and MERCOSUR lasted 25 years. In 2019, a draft of the agreement was prepared. Why 2019? Trump became president in 2017. Why was the negotiation process completed at the end of 2024? Trump was set to take office on January 20, 2025, after the elections held on November 5, 2024.

The formalization of an additional 10% tariff on China, the possibility of a 25% tariff on Canada and Mexico, and the potential for tariffs on the EU accelerated the completion of a 25-year process. The agreement is currently in the approval process by EU member countries and the European Parliament. If approved, it will affect 800 million people.

MERCOSUR, which includes Argentina, Brazil, Paraguay, Uruguay, and Venezuela as core members, and Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname as associate members, is currently the EU's second-largest trading partner after China. The US ranks next.

The EU is at risk due to the additional tariffs imposed by the US on China. Chinese products that will struggle to enter the US market may be pushed towards the EU. This raises concerns about a potential influx of low-priced Chinese goods into EU countries. Therefore, the trade policies between the EU and China need to be closely monitored. Given that the EU accounts for 39.3% of Turkey's exports, any potential moves by China towards the EU also pose risks for Turkey.

On the other hand, to overcome its entanglement with the US and China, the EU will seek new paths by deepening trade relations with non-EU members Switzerland and the UK. Indeed, in the last days of 2024, the EU signed a €550 billion trade agreement with Switzerland.

As 2025 begins, the EU has also turned toward new agreements. Negotiations for an agreement, the principles of which were determined in 2018, were completed with Mexico. Thus, the EU is trying to compensate for potential US tariffs with Latin America. A new negotiation process has also been restarted with Malaysia for another agreement.

Shifting or Deepening Other International Trade Routes

Highlighting the increasing geopolitical tensions and instability risks, the EU emphasizes the importance of developing €45 billion in trade with Malaysia, a member of the Association of Southeast Asian Nations (ASEAN). The members of ASEAN include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

The EU has been making efforts to reduce risks arising from global developments in terms of investments and bilateral relations (de-risking/decoupling). Steps are being taken in this direction.

The two largest economies in Latin America, Mexico and Brazil, expressed the need to review their existing trade agreements in October 2024.

Indonesia joined BRICS as the tenth member at the very beginning of 2025. Bolivia, Malaysia, Kazakhstan, Uganda, and Thailand also wish to become BRICS members. BRICS consists of Brazil, Russia, India, China, South Africa, Egypt, Iran, the United Arab Emirates, Ethiopia, and Indonesia.

Two BRICS members, China and India, are working to deepen their trade relations with ASEAN. BRICS represents half of the world's population and 40% of the total global gross domestic product.

The UK, which decided to leave the EU in 2016, joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the UK.

In May 2025, discussions will take place between ASEAN and the Gulf Cooperation Council (GCC). They also met in November 2024. GCC members include Bahrain, Saudi Arabia, Kuwait, Oman, Qatar, and the United Arab Emirates. China was also invited to the meeting by Malaysia. The dependence of ASEAN countries on China and the issues ASEAN countries face due to China's slowdown necessitate the revitalization of relations with other formations and the invitation of China to the meeting. It should not be forgotten that China is trying to overcome its internal economic problems through international trade and is facing additional tariffs from the US.

We have observed that GCC countries are also developing an Asia strategy focused on China and India in 2024.

In the above lines, there are no initiatives from the US to develop international trade. The geometry of international trade is changing, and everyone is striving to move away from the US. The fault lines of international trade have been breaking for a long time. The fractures are changing in direction and intensity.

Despite the protectionist policies followed by Trump in his first term, and similar policies maintained by Biden, global trade has continued to grow. What comes next will be determined by new trade routes. The next phase of the reshaping trade routes could involve the establishment of alternatives to supranational institutions such as the World Bank, IMF, and United Nations among developing countries. BRICS seems to be the strongest formation for such an initiative. Especially, we are observing that China has become a primary financial source for many countries through its Belt and Road Initiative. It should be emphasized that the weight of developing countries in the global economy has increased since the Great Recession (2007-09).

The US, through its threats, is creating a global opposition to itself with ideas such as purchasing Greenland, making Canada the 51st state of the US, seizing the Panama Canal, "cleansing" Gaza of Palestinians, and claiming ownership over Gaza. It is easy to assert that the US under Trump's leadership has embraced fascism. Imperialism presents itself in a new guise.

The US is in the spotlight with its attitudes that destroy institutions and disregard the rule of law. It is withdrawing from international organizations and some treaties. However, this does not mean it is closing in on itself. On the contrary, it is pursuing hegemony with an arrogant and law-defying attitude.

As global trade undergoes changes due to the trend of risk reduction towards China, it is now being shaped by trends of escaping from the US.