Michael Kovrig warns against relying on China as alternative to U.S.

The market implication is not that China becomes uninvestable, but that the risk premium for “China as a simple substitute” should widen across sectors that rely on policy stability, legal recourse, or uninterrupted cross-border flows. The second-order loser is any country or company that assumes trade diversification into China can offset U.S. exposure without a governance discount; that discount is most acute in capital goods, critical minerals, and higher-value manufacturing where IP leakage or procurement coercion can erase margin gains.

This is also a reminder that geopolitical risk is asymmetric: downside can arrive abruptly via regulatory, customs, or detentions-related shocks, while upside from improved ties accrues slowly and usually requires political concessions. Over the next 3-12 months, the more relevant catalyst is not a headline break in relations but incremental policy friction — export controls, procurement screens, and “de-risking” language hardening into actual sourcing shifts. That tends to benefit Mexico, Vietnam, India, and select U.S./allied suppliers that can absorb redirected orders without needing China’s institutional risk.

The contrarian angle is that some of the market already prices in a China unwind, so the opportunity is less about shorting China outright and more about owning the re-routing of trade flows. If Canada and other developed economies become less willing to treat China as a fallback market, the competitive advantage shifts to firms with redundant production footprints and pricing power from supply-chain optionality. The key question is whether this evolves into a slow-burn portfolio rotation or a policy shock; if it’s the former, the best entries are on dips in beneficiaries of “China+1,” not on panic headlines.