Deglobalization and Your XEQT Portfolio: Does Reshoring Threaten Global Diversification?

A few weekends ago, I was standing in a friend’s backyard, flipping burgers and minding my own business, when his brother-in-law wandered over with a beer and a question.

“So I’ve been listening to this podcast about deglobalization,” he said, lowering his voice like he was sharing insider intel. “They’re saying the era of globalization is over. Countries are pulling their supply chains home. Trade wars everywhere. If the whole world is splitting apart, what’s the point of owning a global ETF?”

I took a second to flip the burgers. It was a genuinely good question – the kind that sounds devastating when someone says it with enough confidence at a BBQ. If globalization is dying, doesn’t that undermine the entire case for XEQT?

I’ve been thinking about it ever since. And after digging into the data, talking to people who follow global trade much more closely than I do, and stress-testing my own assumptions, I came away feeling more confident in XEQT than before – not less. Here’s why.

1. What Deglobalization Actually Means

Before we can talk about whether deglobalization threatens your portfolio, we need to define what people actually mean when they use the word. Because it turns out, “deglobalization” is one of those terms that gets thrown around on podcasts and in headlines without much precision.

Here’s what is actually happening in the global economy:

• Reshoring – Companies moving manufacturing back to their home country. Think of US firms bringing chip fabrication back from Asia, or European companies rebuilding domestic pharmaceutical production.

• Friend-shoring – Instead of bringing everything home, companies shift supply chains to politically aligned countries. The US sources more from Mexico and India instead of China. Europe leans more on Turkey and Morocco.

• Nearshoring – Similar to friend-shoring, but focused on geographic proximity. For Canada, this often means tighter integration with the US and Mexico under CUSMA (the updated NAFTA).

• Trade fragmentation – The global trading system is splitting into blocs. Western democracies trade more with each other, China deepens ties with Russia, the Middle East, and parts of Africa. The WTO’s influence fades.

• US-China decoupling – The biggest single storyline. The world’s two largest economies are deliberately reducing their dependence on each other in strategic sectors like semiconductors, AI, rare earth minerals, and advanced manufacturing.

All of these trends are real. I’m not going to pretend they aren’t happening – they are, and they’ve accelerated dramatically since COVID, the Russia-Ukraine war, and the tariff escalations of 2025-2026. But “real” and “fatal to global investing” are two very different things.

2. The Headlines vs. The Reality

Here’s where the BBQ conversation goes off the rails. The narrative says globalization is dying. The data says something quite different.

Global trade volumes hit record highs in 2024 and continued climbing into 2025. According to the World Trade Organization, world merchandise trade volume grew by approximately 2.7% in 2024, with total goods trade exceeding $25 trillion. The CPB World Trade Monitor – one of the most-cited trackers of global trade activity – has shown trade volumes at or near all-time highs for the past two years.

That doesn’t sound like a world that’s retreating behind its borders.

What’s actually happening is more nuanced:

• Trade isn’t shrinking – it’s rerouting. US imports from China have declined significantly since 2018. But US imports from Vietnam, India, Mexico, and other countries have surged to fill the gap. In many cases, Chinese companies have simply set up factories in Vietnam or Mexico to serve the US market indirectly. The goods still flow. The routing changes.

• Services trade is booming. Even as goods trade restructures, global trade in services – software, consulting, financial services, digital platforms – continues to grow rapidly. Services trade is less affected by tariffs and borders.

• Cross-border investment remains massive. Foreign direct investment flows, cross-border lending, and international portfolio investment all remain at historically elevated levels. Capital still moves freely across borders.

• New trade corridors are opening. India-Middle East-Europe. Southeast Asia-Africa. Latin America-Asia. While US-China trade declines, other bilateral relationships are growing quickly.

The economist who coined the term “slowbalization” (Adjiedj Bakas) was describing a deceleration in the rate of globalization growth, not a reversal. And even that framing is debatable when you look at the raw numbers.

The bottom line: the world economy is reorganizing, not disintegrating. And that distinction matters enormously for XEQT investors.

3. How Companies Inside XEQT Are Adapting

Here’s something that doesn’t get enough attention in the deglobalization debate: the companies you own inside XEQT aren’t sitting still. These are the largest, most sophisticated businesses on the planet, and they’ve been adapting to geopolitical shifts in real time.

When you hold XEQT, you own over 9,000 companies across 49 countries. Look at how the biggest names in your portfolio are responding to deglobalization:

• Apple – Once almost entirely dependent on Chinese manufacturing, Apple has aggressively diversified production to India and Vietnam. By 2025, India was assembling a significant share of iPhones. Apple didn’t retreat from global markets – it diversified its supply chain across more countries.

• TSMC (Taiwan Semiconductor) – The world’s dominant chipmaker is building massive new fabrication plants in Arizona, Japan, and Germany. It’s spreading production geographically while maintaining its global customer base. TSMC is inside XEQT through the emerging markets allocation.

• Toyota – Already operates manufacturing plants on virtually every continent. When trade routes shift, Toyota’s distributed production network adapts. It builds cars where it sells them.

• Nestle – Produces food and beverages in 188 countries. Nestle doesn’t need to ship products across oceans – it manufactures locally and sells locally across the world.

• Canadian Natural Resources and Suncor – Even Canadian energy companies inside XEQT are adapting by diversifying export destinations beyond the US, exploring LNG exports to Asia, and investing in new energy infrastructure.

The point is this: deglobalization doesn’t mean these companies become less profitable. It means they spend money to restructure supply chains – and in many cases, that restructuring makes them more resilient, not less. They’re building redundancy, reducing concentration risk, and opening new markets.

As a shareholder through XEQT, you benefit from these adaptations automatically.

4. XEQT’s Secret Weapon: Market-Cap Weighting Adjusts Automatically

This is the part of the argument that I think most people miss, and it’s the reason I sleep well at night despite all the deglobalization headlines.

XEQT is a market-cap-weighted fund. That means the allocation to each country and company adjusts automatically based on the value of those companies and markets. You don’t have to guess which regions will “win” the deglobalization era. The fund does it for you.

Here’s how it works in practice:

• If reshoring causes American industrial companies to boom, their stock prices rise, their market caps grow, and XEQT’s US allocation naturally increases. You benefit.

• If friend-shoring makes India and Vietnam the next manufacturing powerhouses, companies in those countries grow, and XEQT’s emerging markets allocation adjusts upward. You benefit.

• If European defense spending surges due to geopolitical tensions, European defense contractors and industrial firms rise in value, and your international developed allocation reflects that. You benefit.

• If Canadian resource companies gain from new trade corridors, your Canadian allocation captures that growth. You benefit.

You don’t have to predict the future. The market-cap weighting does the rebalancing for you.

This is fundamentally different from picking individual countries or sectors. If you decided in 2020 that “reshoring means I should go all-in on US industrials,” you would have missed the boom in Indian and Vietnamese manufacturing stocks. If you bet on European energy independence, you might have missed the AI-driven tech rally in the US. The beauty of XEQT is that you own it all – and the winners naturally become a bigger share of your portfolio.

This is what XEQT’s automatic rebalancing does behind the scenes, and it’s one of the most underrated features of holding a global all-equity ETF.

5. The Danger of Picking “Winning” Countries

Let me be direct about something: trying to predict which countries will benefit from deglobalization is just market timing in disguise.

I see this constantly in investing forums and on social media. “Forget China, go all-in on India.” “Reshoring means US industrials are the play.” “Europe is finished, sell everything international.” “Canada will benefit from nearshoring – overweight the TSX.”

Every single one of these takes sounds logical. And every single one could be dead wrong.

Here’s what the historical data tells us about country-picking:

• Japan was the “obvious” winner in the 1980s. The Japanese stock market hit its all-time high in December 1989. Investors who went all-in on Japan waited 34 years for the Nikkei to recover. It finally passed its 1989 peak in February 2024.

• China was the “obvious” winner in the 2000s. The narrative was irresistible: a billion consumers, massive infrastructure spending, GDP growth above 10%. But the Shanghai Composite index peaked in 2007 and, despite China’s enormous economic growth over the next two decades, has never sustainably recovered to those levels.

• Brazil, Russia, India, and China (the BRICs) were the “obvious” winners of the 2010s. Investors piled into emerging market funds. The MSCI Emerging Markets index then underperformed the S&P 500 for over a decade.

• The US has been the “obvious” winner since 2010. And it has been – spectacularly so. But that is no guarantee it will be the winner of the next decade. US market dominance has waxed and waned throughout history.

The lesson is always the same: the “obvious” trade rarely works out the way people expect. Countries that grow their GDP fastest don’t necessarily produce the best stock returns. Political stability doesn’t always equal market performance. The consensus narrative is usually already priced into stocks by the time you hear about it at a BBQ.

When you hold XEQT, you sidestep this entire problem. You own the whole world. Whichever country or region ends up “winning” the next decade – whether it’s the US, India, Europe, or somewhere nobody is talking about yet – you own it.

This is the same logic that protects you from home country bias. Canadians love Canadian stocks, but Canada represents only about 3% of global market capitalization. Betting your retirement on 3% of the world’s economy is a gamble, not a strategy.

6. Geopolitical Disruption Has Never Killed Global Investing

If you zoom out far enough, the current deglobalization trend is not even close to the most severe geopolitical disruption that global markets have survived. History is full of moments that felt like the end of the interconnected world – and in every single case, markets adapted and eventually thrived.

• The Cold War (1947-1991) – The world was literally split into two hostile blocs with nuclear weapons pointed at each other. Global trade didn’t just survive – it exploded. The post-war period saw the creation of the GATT, the rise of multinational corporations, and some of the greatest bull markets in history.

• The 1970s oil shocks – OPEC weaponized oil prices, inflation ravaged Western economies, and the phrase “stagflation” entered the vocabulary. Investors who stayed in broadly diversified portfolios through the chaos were rewarded handsomely in the 1980s bull market.

• The 2008 Global Financial Crisis – The entire global banking system nearly collapsed. International trade plunged 12% in a single year – the sharpest decline since World War II. Within three years, trade volumes had fully recovered and were hitting new highs.

• COVID-19 (2020) – Global supply chains seized up. Borders closed. Ships sat outside ports for months. “Deglobalization” was on the cover of every business magazine. Markets crashed 35% in weeks. And then they recovered to all-time highs within months. Supply chains adapted. Trade recovered.

• Russia-Ukraine War (2022) – Energy markets were thrown into chaos. European gas prices spiked 10x. Food supply chains were disrupted. And yet, global trade volumes hit records again by 2024.

The pattern is remarkably consistent: geopolitical shocks disrupt trade in the short term, but human ingenuity and economic incentives drive recovery and adaptation. Companies find new suppliers. Countries find new partners. Trade routes shift. The global economy is far more resilient than headlines suggest.

This is the same point I made in my post about geopolitical risk and XEQT – the risks are real, but historically, staying invested through turmoil has been far more profitable than trying to hide from it.

7. Why Canada Specifically Benefits from Global Diversification

As Canadian investors, we have some unique characteristics that make global diversification through XEQT especially important in a deglobalizing world.

Our economy is small and concentrated. Canada’s stock market is roughly 3% of global market capitalization. The TSX is heavily concentrated in financials (about 30%), energy (about 17%), and materials (about 11%). That means if you only invest in Canadian stocks, you’re making a massive bet on banks, oil, and mining.

We’re a trading nation. Canada exports roughly 30% of its GDP – much higher than the US at about 11%. About 75% of our exports go to a single customer: the United States. That makes our economy unusually vulnerable to bilateral trade disruptions, which is exactly what we’ve been experiencing with tariffs and trade tensions.

The Canadian dollar adds another layer of risk. When you invest only in Canadian stocks, your returns are entirely in CAD. If the Canadian dollar weakens (as it has against the USD over many periods), your purchasing power erodes. XEQT’s global diversification gives you exposure to dozens of currencies. When the CAD falls, your US and international holdings become worth more in Canadian dollar terms. It’s a natural hedge.

Canada could actually benefit from nearshoring – our proximity to the US and membership in CUSMA means Canadian manufacturers could capture some reshored production. But you don’t have to bet on that outcome. Through XEQT, you benefit if it happens (through your ~24% Canadian allocation) and you’re protected if it doesn’t (through your ~76% international allocation).

Here’s a simple way to think about it:

The case for XEQT is strongest for Canadians precisely because our home market is small, concentrated, and dependent on one trading partner. Diversification isn’t a luxury – it’s a necessity.

8. What You Should Actually Do

So after all of this, what’s the practical takeaway? Here is what I’d tell my friend’s brother-in-law at the BBQ if he came back for a second burger:

First, stop trying to predict the future of global trade. You can’t. I can’t. The world’s best economists can’t. And the market has already priced in the most likely scenarios anyway.

Second, understand what XEQT actually gives you. It’s not a bet on globalization continuing unchanged. It’s ownership of the world’s best companies, wherever they happen to be, with automatic rebalancing as the world changes. Whether trade routes shift, supply chains restructure, or new economic powerhouses emerge, XEQT’s holdings adjust to reflect reality.

Third, remember that the biggest risk isn’t deglobalization – it’s not investing at all. Every year you spend on the sidelines waiting for geopolitical clarity is a year of missed compound growth. There has never been a period in modern history when geopolitical risks were absent. The Cold War, oil shocks, financial crises, pandemics, trade wars – there’s always something to worry about. The investors who built the most wealth were the ones who stayed invested through all of it.

Fourth, keep buying on a regular schedule. Dollar-cost averaging into XEQT means you buy through every headline, every crisis, and every recovery. Some of your purchases will be at prices that look brilliant in hindsight. Some won’t. Over decades, consistency beats cleverness every single time.

Fifth, if you’re worried about Canada-specific risk, XEQT is already your answer. You don’t need to construct a complicated multi-ETF portfolio to protect against Canadian trade disruptions. XEQT gives you that protection built in, with only about 24% exposure to Canada and the rest spread across the world.

The World Changes. Your Strategy Doesn’t Have To.

Deglobalization is a real trend. Supply chains are restructuring. Trade relationships are shifting. Geopolitical tensions are higher than they’ve been in decades. None of this is fake, and none of it should be dismissed.

But here’s what I keep coming back to: every generation of investors has faced a version of this argument. In the 1940s, people said global investing was dead because of World War II. In the 1970s, the oil crisis was supposed to end Western economic dominance. In 2008, the global financial system literally almost collapsed. In 2020, a pandemic shut down the world.

Every time, the advice to abandon global diversification turned out to be wrong. Every time, the investors who held a broadly diversified portfolio through the turmoil came out ahead.

XEQT doesn’t require globalization to work perfectly. It requires the world economy to keep functioning – for people to keep buying things, companies to keep innovating, and markets to keep rewarding productive enterprise. That has been true through every crisis, every war, every pandemic, and every political upheaval in modern history.

So the next time someone at a BBQ tells you that deglobalization means your global ETF is doomed, smile, take a sip of your drink, and know that you’re positioned for whatever comes next. Not because you predicted the future. But because you didn’t need to.

Stay the course. Keep buying. Let the world sort itself out.