U.S. trade policy uncertainty has sent shockwaves through global markets, as President Donald Trump moved to impose a 15% tariff following the Supreme Court of the United States ruling invalidating his emergency trade levies. Investors reacted quickly, rotating out of risk assets and the dollar, while seeking shelter in gold, silver, and safe-haven currencies. The turbulence highlights the fragility of global investor confidence when policy reversals collide with high-stakes geopolitical and economic risks.
Wall Street and Currency Volatility
U.S. stock futures fell sharply, with S&P 500 futures down 0.5% and Nasdaq futures slipping 0.6%. The dollar weakened across major pairs, losing 0.21% versus the yen and 0.34% against the Swiss franc, while the euro gained 0.23%. European equities also reflected caution: the STOXX 600 fell 0.19%, Germany’s DAX slid 0.36%, and Britain’s FTSE 100 edged down 0.1%.
Asian markets, however, were mixed. The MSCI Asia index excluding Japan rose 0.83%, while Hong Kong’s Hang Seng surged 2.53% on expectations of lower tariffs for China. Japan’s Nikkei futures fell 0.4% ahead of a holiday, highlighting regional divergence driven by perceived winners and losers in U.S. tariff policy.
Safe-Haven Assets Rally
Amid the uncertainty, investors sought protection in gold and silver, which climbed 0.6% and 2% respectively. Safe-haven currencies, including the Japanese yen and Swiss franc, appreciated as risk-off sentiment grew. Government bonds saw slight gains, with the U.S. 10-year Treasury yield dipping to 4.077%, reflecting flight-to-quality buying. Brent crude prices fell 1.1% to $70.97 a barrel, reversing gains from earlier geopolitical risk sentiment linked to U.S.-Iran tensions.
Tariff Confusion and Its Economic Implications
Trump’s latest tariffs add layers of ambiguity. While the Supreme Court struck down his emergency powers, the new 15% levy relies on Section 122 of the 1974 Trade Act, an untested statute. Questions remain over timing, exclusions, and applicability by country. Some nations, including the UK and Australia, had lower tariffs under prior rules, while many Asian exporters faced higher duties. The Yale Budget Lab estimates the average effective tariff rate at 13.7% following the announcement, down from 16% pre-ruling, with the 15% rate potentially dropping to 9.1% after 150 days.
“This circular process of tariff announcements, legal challenges, and revisions is creating profound uncertainty for markets,” said Rodrigo Catril, senior FX strategist at NAB.
Market Sentiment and Investor Behavior
The episode reflects broader structural concerns about U.S. trade policy’s unpredictability. Investors are no longer just reacting to tariffs themselves, but to the instability and volatility of policy enforcement. The uncertainty affects supply chains, corporate earnings forecasts, and capital allocation decisions. Nvidia’s upcoming earnings, for example, are being closely watched, given the company’s 8% weighting in the S&P 500, demonstrating how trade policy shocks can amplify market sensitivity to specific corporate results.
Analytical Outlook
Trump’s oscillating trade policy highlights a critical tension between political objectives and market stability. While tariffs are framed as instruments to advance domestic economic priorities, the resulting unpredictability imposes systemic costs: currency swings, equity market volatility, and flight to safe assets. The mixed regional responses Asian equities partially rallying, European markets cautious underscore how interconnected global trade and finance are, and how unevenly shocks are absorbed.
In essence, this episode illustrates a modern economic paradox: protective trade measures intended to strengthen domestic interests can, in practice, destabilize markets worldwide. Investors now must hedge not only against tariffs themselves but also against the policy volatility that accompanies them a scenario likely to persist as long as U.S. trade decisions are made unilaterally and unpredictably.
Trump’s approach has transformed trade from a predictable framework into a high-stakes, reactive arena, forcing global markets to continuously recalibrate. The lesson is clear: in today’s interconnected financial system, the cost of policy uncertainty often outweighs the intended protectionist benefit.
epa12767533 Steel products for export are stacked at a port in Pyeongtaek, around sixty kilometers south of Seoul, South Korea, 22 February 2026. Photo by YONHAP / EPA
Feb. 22 (Asia Today) — South Korea’s industrial sector said there is no immediate change in tariff rates but warned that uncertainty has grown after U.S. President Donald Trump signaled plans to impose new global tariffs.
Trump said Friday he would raise the proposed “global tariff” rate from 10% to 15% following a U.S. Supreme Court ruling that struck down his earlier reciprocal tariffs. The 15% duties previously applied to South Korea are expected to reappear under the new global tariff framework.
Industry officials said item-specific tariffs on automobiles, steel and semiconductors have not been directly addressed in the latest announcement, leaving companies cautious about possible next steps.
Major exporters are closely monitoring developments as Washington has yet to finalize detailed tariff guidelines.
Semiconductors, one of South Korea’s top export items, are currently subject to product-specific tariff discussions but remain duty-free for now. However, companies have not ruled out the possibility that Washington could soon put semiconductor tariffs on the negotiating table or raise rates to offset revenue lost from the invalidated reciprocal tariffs.
SK Group Chairman Chey Tae-won said after attending the U.S. Trans-Pacific Dialogue that he would review the court ruling before commenting further, reflecting the cautious stance of corporate leaders.
Automobile and steel tariffs are expected to remain in place regardless of the court decision. Automobiles and auto parts currently face a 15% tariff, while steel and aluminum were hit with a 50% tariff last year. Analysts said additional increases in those sectors appear unlikely in the near term.
For food, cosmetics, home appliances and chemical products, a 15% global tariff would largely mirror the current reciprocal tariff level. If the rate were set at 10% instead, exporters could see a modest reduction compared with the existing 15% rate.
While companies say there is no immediate operational impact, executives are concerned that Trump could invoke other trade authorities to introduce new measures, further complicating trade planning.
Industry officials said businesses are preparing contingency strategies as they await clearer guidance from Washington.
WASHINGTON — For a few hours on Friday, congressional Republicans seemed to get some relief from one of the largest points of friction they have had with the Trump administration. It didn’t last.
The Supreme Court struck down a significant portion of President Trump’s global tariff regime, ruling that the power to impose taxes lies with Congress. Many Republicans greeted the Friday morning decision with measured statements, some even praising it, and GOP leaders said they would work with Trump on tariffs going forward.
But by the afternoon, the president made clear he had no intention of working with Congress and would continue to go it alone by imposing a new global import tax. He set the new tax at 10% in an executive order, announcing Saturday he planned to hike it to 15%.
Trump is enacting the new tariff under a law that restricts the import taxes to 150 days and has never been invoked this way before. Though that decision is likely to have major implications for the global economy, it might also ensure that Republicans will have to keep answering for Trump’s tariffs for months to come, especially as the midterm elections near. Opinion polls have shown most Americans oppose Trump’s tariff policy.
“I have the right to do tariffs, and I’ve always had the right to do tariffs,” Trump said at a news conference Friday, contending that he doesn’t need Congress’ approval.
Tariffs have been one of the only areas where the Republican-controlled Congress has broken with Trump. Both the House and Senate at various points had passed resolutions intended to rein in the tariffs imposed on key trade partners such as Canada. It’s also one of the few issues about which Republican lawmakers, who came of age in a party that largely championed free trade, have voiced criticism of Trump’s economic policies.
“The empty merits of sweeping trade wars with America’s friends were evident long before today’s decision,” Sen. Mitch McConnell (R-Ky.), the former longtime Senate Republican leader, said in a statement Friday, noting that tariffs raise the prices of homes and disrupt other industries important to his home state.
Democrats’ approach
Democrats, looking to win back control of Congress, intend to make McConnell’s point their own. At a news conference Friday, Senate Democratic leader Chuck Schumer said Trump’s new tariffs “will still raise people’s costs and they will hurt the American people as much as his old tariffs did.”
Schumer challenged Republicans to stop Trump from imposing the new global tariff. Democrats on Friday also called for refunds to be sent to U.S. consumers for the tariffs struck down by the Supreme Court.
“The American people paid for these tariffs and the American people should get their money back,” Sen. Elizabeth Warren (D-Mass.) said on social media.
The remarks underscored one of the Democrats’ central messages for the midterm campaign: that Trump has failed to make the cost of living more affordable and has inflamed prices with tariffs.
Small and midsize U.S. businesses have had to absorb the import taxes by passing them along to customers in the form of higher prices, employing fewer workers or accepting lower profits, according to an analysis by the JPMorganChase Institute.
Will Congress act?
The Supreme Court decision Friday made it clear that a majority of justices believe that Congress alone is granted authority under the Constitution to levy tariffs. Yet Trump quickly signed an executive order citing the Trade Act of 1974, which grants the president the power to impose temporary import taxes when there are “large and serious United States balance-of-payments deficits” or other international payment problems.
The law limits the tax to 150 days without congressional approval to extend it. The authority has never been used and therefore never tested in court.
Republicans at times have warned Trump about the potential economic fallout of his tariff plans. Yet before his “Liberation Day” of global tariffs last April, GOP congressional leaders declined to directly defy the president.
Some GOP lawmakers cheered on the new tariff policy, highlighting a generational divide among Republicans, with a mostly younger group fiercely backing Trump’s strategy. Rather than heed traditional free trade doctrine, they argue for “America First” protectionism, which they argue will revive U.S. manufacturing.
Republican Sen. Bernie Moreno, an Ohio freshman, slammed the Supreme Court’s ruling on Friday and called for GOP lawmakers to “codify the tariffs that had made our country the hottest country on Earth!”
A few Republican opponents of the tariffs, meanwhile, openly cheered the Supreme Court’s decision. Rep. Don Bacon (R-Neb.), a critic of the administration who is not seeking reelection, said on social media that “Congress must stand on its own two feet, take tough votes and defend its authorities.”
Bacon predicted there would be more Republican resistance coming. He and a few other GOP members were instrumental this month in forcing a House vote on Trump’s tariffs on Canada. As that measure passed, Trump vowed political retribution for any Republican who voted to oppose his tariff plans.
Groves writes for the Associated Press. AP writers Matt Brown, Joey Cappelletti and Lisa Mascaro contributed to this report.
The Supreme Court’s decision to strike down Trump’s so-called emergency tariffs doesn’t end a legal fight — it opens another that could put as much as $175 billion in refunds to companies on the line.
In a 6–3 ruling Friday, the US Supreme Court rejected President Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping duties. How the government should handle the billions already collected from importers is still not clear.
The US Court of International Trade (USCIT) now faces the task of determining whether — and how — to unwind months of tariff collections that experts say could total roughly $175 billion.
Markets are now parsing the economic fallout. Olu Sonola, head of US economics at Fitch Ratings, called the ruling “Liberation Day 2.0 — arguably the first one with tangible upside for US consumers and corporate profitability.” More than 60% of the 2025 tariffs effectively vanish, he explained. That cuts the effective US tariff rate from about 13% to around 6% and removes more than $200 billion in expected annual collections.
The bigger story is heightened tensions within the US wherever business and politics intersect. After all, tariffs could reappear in revised form, Sonola adds. Indeed, Trump has already retaliated with a new 10% global tariff under different statutory authority.
“Layer on potential tariff refunds, and you introduce a messy operational and legal overhang that amplifies economic uncertainty,” Sonola says.
More Litigation To Come
Since Trump first announced the tariffs last April, hundreds of companies have clapped back with lawsuits.
Wholesale giant Costco, cosmetics firm Revlon and seafood packager Bumble Bee Foods are among the US-based companies demanding refunds. Kawasaki Motors and Yokohama Tire, both based in Japan, also filed complaints.
How those lawsuits will proceed are completely unknown, and that’s OK with Trump.
“At his press conference today Trump suggested that he will try to drag out the refund process by tying it up in court,” Phillip Magness, a senior fellow at the Independent Institute, says. “I suspect the USCIT will have very little patience for any delay tactics.” Also, the future of Trump’s trade deals, agreements struck with UK and Japan, for example, are also ambiguous.
“Most of these alleged deals have never been released in writing, so it is questionable whether they were even legally binding in the first place,” Magness says.
Magness also pointed to the differing opinions — especially Justice Neil Gorsuch’s — as a revealing glimpse into the Court’s evolving judicial philosophy.
Gorsuch’s statements leaned heavily on statutory interpretation and the “major questions doctrine,” which requires clear congressional authorization for policies of vast economic or political significance. He sharply criticized Justice Clarence Thomas’s dissent, arguing it would effectively grant the president sweeping authority under vague congressional delegations.
“Gorsuch showed that Thomas’s logic would effectively extend unlimited power to the president in cases of congressional delegation — a position that is not only constitutionally suspect, but at odds with Thomas’s own previous judicial philosophy. I believe that Thomas’s dissent greatly damaged his reputation for consistency as a conservative legal thinker in the ‘original intent’ camp,” Magness explains. “Gorsuch’s concurrence highlighted how Thomas’s position broke sharply from those principles by attempting to carve out an exception for Trump’s tariff agenda.”
‘Significant Consequences’
Justice Brett Kavanaugh, in dissent, warned that the federal government may be stuck holding the bag and required to refund billions of dollars to importers who paid the IEEPA tariffs, despite costs being already passed onto consumers.
Refunds, he continued, would have “significant consequences for the US Treasury.”
Certain industry groups don’t seem to mind, and are already pressing Customs and Border Protection to move quickly, likely through its Automated Commercial Environment system, to process claims.
The American Apparel & Footwear Association (AAFA), for example, welcomed the Court’s decision, saying it reaffirms that only Congress has constitutional authority to levy duties.
AAFA President and CEO Steve Lamar, in a prepared statement, called the ruling a validation of Article I powers and thanked the justices for their review of the case.
“CBP’s recently modernized, fully electronic refund process should help to expedite this effort,” he said.
WASHINGTON — The Supreme Court ruled Friday that President Trump’s sweeping worldwide tariffs are illegal and cannot stand without the approval of Congress.
The 6-3 decision deals Trump his most significant defeat at the Supreme Court.
Last year, the justices issued temporary orders to block several of his initiatives, but Friday’s ruling is the first to hold that the president overstepped his legal authority.
Chief Justice John G. Roberts Jr., speaking for the court, said Congress has the power to impose taxes and tariffs, and lawmakers did not do so in an emergency law that does not mention tariffs.
“The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it,” he wrote.
“And until now no President has read the International Emergency Economics Act to confer such power. We claim no special competence in matters of economics or foreign affairs. We claim only, as we must, the limited role assigned to us by Article III of the Constitution. Fulfilling that role, we hold that IEEPA does not authorize the President to impose tariffs,” Roberts wrote.
Justice Neil M. Gorsuch in a concurring opinion stressed the role of Congress.
“The Constitution lodges the Nation’s lawmaking powers in Congress alone,” he said.
Justices Clarence Thomas, Samuel A. Alito and Brett M. Kavanaugh dissented.
Trump claimed his new and ever-shifting tariffs would bring in trillions of dollars in revenue for the government and encourage more manufacturing in the United States.
But manufacturing employment has gone down over the past year, in part because American companies have been hurt by higher costs for parts that they import.
Critics said the new taxes hurt small businesses in particular and raised prices for American consumers.
The justices focused on the president’s claimed legal authority to impose tariffs as responses to an international economic emergency.
Several owners of small businesses sued last year to challenge Trump’s import taxes as illegal and disruptive.
Learning Resources, an Illinois company which sells educational toys for children, said it would have to raise its prices by 70% because most of its toys were manufactured in Asia.
A separate suit was filed by a New York wine importer and Terry Precision Cycling, which sells cycling apparel for women.
Both suits won in lower courts. Judges said the International Emergency Economic Powers Act of 1977 cited by Trump did not mention tariffs and had not been used before to impose such import taxes.
The law said the president in response to a national emergency may deal with an “unusual and extraordinary threat” by freezing assets or sanctioning a foreign country or otherwise regulating trade.
Trump said the nation’s long-standing trade deficit was an emergency and tariffs were an appropriate regulation.
While rejecting Trump’s claims, the lower courts left his tariffs in place while the administration appealed its case to the Supreme Court.
European steel shipments to the US declined 30% between June and December 2025 compared with the same period a year earlier, according to recent Eurostat data compiled by Eurofer, the Brussels-based industry group.
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The decline underscores the impact of the US’s 50% tariffs on EU steel, even after the EU and US signed a trade agreement in July 2025 agreeing a blanket 15% US tariff on EU goods. Steel was carved out of that deal and talks to ease duties remain stuck.
“A 30% drop in steel exports to the US within just six months is a clear signal that the blunt 50% tariffs imposed by the US government on EU steel are damaging our industry,” Eurofer Director general Axel Eggert said.
“The US decision to include EU downstream steel products, such as machinery, will have another huge negative impact on us and our European customers,” he added.
Washington imposed 50% tariffs on EU steel and aluminium in June 2025 and extended the measures to more than 400 steel and aluminium products in August.
Steel talks tied to EU-US trade deal enforcement
The US has framed the tariffs as a shield against Chinese overcapacity flooding global markets, including Europe.
With Chinese exports increasingly redirected from the US to the EU, the European Commission proposed on 7 October 2025 to halve the volume of steel allowed into the bloc duty-free and to levy a 50% tariff on imports exceeding a quota of 18.3 million tons a year.
The proposal steel needs to be adopted by the EU legislator. Meanwhile Brussels itself hopes to reopen talks with the White House to secure lower duties on EU steel.
But US negotiators have linked any resumption of discussions to the implementation of last summer’s EU-US trade deal, struck by Commission President Ursula von der Leyen and President Donald Trump. Under that pact, the EU agreed to cut its tariffs on US goods to zero while accepting 15% duties on its exports to the US.
With the EU legislative process still requiring approval from lawmakers and member states, Washington’s patience is wearing thin. Tensions could rise further after EU lawmakers introduced amendments that may complicate talks with capitals.
The European Parliament is expected to vote on the deal in March, paving the way for negotiations with member states.
The talks stalled on the European side after the US threatened to annex Greenland militarily from Denmark in January. Although the US has softened its language, it led to delays. The administration’s continuous lobbying for less stringent rules when it comes to digital legislation in Europe has also added obstacles to the talks.
Taipei agrees to buy some $85bn of US energy, aircraft and equipment in exchange for 15 percent tariff rate.
The United States and Taiwan have finalised a trade deal to reduce tariffs on Taiwanese exports and facilitate billions of dollars of spending on US goods.
The agreement announced on Thursday lowers the general tariff on Taiwanese goods from 20 percent to 15 percent, the same level as Asian trade partners South Korea and Japan, in exchange for Taipei agreeing to buy about $85bn of US energy, aircraft and equipment.
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Under the deal, Taiwan will eliminate or reduce 99 percent of tariff barriers and provide preferential market access to numerous US goods, including auto parts, chemicals, machinery, health products, dairy products and pork, the office of the US trade envoy said in a statement.
The US will, in turn, exempt a large range of Taiwanese goods from tariffs, including chalk, castor oil, pineapples and ginseng.
Taiwanese President William Lai Ching-te said Taipei had secured tariff exemptions for some 2,000 Taiwanese products, hailing the agreement as a “pivotal” moment for the self-governing island’s economy.
Lai said the deal, when various carve-outs are included, would take the average tariff rate on Taiwanese goods to 12.3 percent.
“From familiar items such as Phalaenopsis orchids, tea, bubble tea ingredients (tapioca starch), and coffee, to pineapple cakes, taro, pineapples, and mangoes – these products that represent Taiwan will become more price-competitive in the US market,” Lai said in a statement on social media.
“We aim not only to sell Taiwan’s great flavors overseas, but also to ensure Taiwanese brands truly enter international markets,” he said.
Lai made no mention of Taiwan’s chip industry, a crucial driver of the island’s economy that is estimated to account for up to 20 percent of gross domestic product (GDP).
Taiwan’s exports rose by 35 percent in 2025 on the back of furious demand for its AI chips, hitting a record $640.75bn.
Thursday’s agreement notably does not include specific commitments from Taiwan to invest in the US chip industry, despite an announcement by US President Donald Trump’s administration last month that Taiwanese firms would pour $250bn into the sector.
A fact sheet released by the Office of the US Trade Representative said the two sides “take note” of the January deal, which included a prior commitment by chip giant Taiwan Semiconductor Manufacturing to invest $100bn in the US.
US Trade Representative Jamieson Greer said Thursday’s agreement built on the longstanding trade relations between Taiwan and the US and would “significantly enhance the resilience of our supply chains, particularly in high-technology sectors”.
“President Trump’s leadership in the Asia Pacific region continues to generate prosperous trade ties for the United States with important partners across Asia, while further advancing the economic and national security interests of the American people,” Greer said.
Nearly one-third of Taiwan’s exports went to the US in 2025, making the country the island’s biggest market for the first time since 2000.
Feb. 12 (UPI) — In a rare rebuke of the Trump administration, the Republican-led House on Wednesday moved to block sweeping tariffs imposed on Canada by President Donald Trump.
In a 219-211 vote on Wednesday evening, House lawmakers approved legislation terminating a national emergency Trump declared early in his administration to slap tariffs on the United States’ northern neighbor.
Six Republicans joined their Democratic colleagues to pass the legislation into an uncertain future in the Senate. One Democrat, Rep. Jared Golden of Maine, voted against terminating the emergency.
The legislation, however, could end up being only symbolic. Even if the GOP-led majority approves it, President Donald Trump would be expected to veto it.
Even as the resolution faces an uncertain future, Rep. Gregory Meeks, D-N.Y., the ranking member of the House Foreign Affairs Committee and sponsor of H.J.Res.72, said Democrats, joined by several GOP lawmakers, forced the measure to the floor to put Republicans on record.
“The question was simple: stand with working families and lower costs, or keep prices high out of loyalty to Donald Trump?” Meeks, who has argued the tariffs have increased household costs, said in a statement following the vote.
“House Democrats will continue fighting to lower costs, even if most Republicans won’t.”
Tariffs have been a mechanism central to Trump’s trade and foreign policy, using economic measures to right what he sees as improper trade relations and to penalize nations he feels are doing him and the United States wrong.
On Feb. 1, Trump declared a national emergency with respect to Canada over drugs entering the United States across their shared border, alleging Ottawa was “failing to devote sufficient attention and resources or meaningfully coordinate with the United States law enforcement partners to effectively stem the tide of illicit drugs.”
Under the International Emergency Economic Powers Act, Trump imposed a sweeping 25% tariff on most Canadian goods and a 10% duty on Canadian energy products.
The tariffs have kicked off a trade war with Canada and have begun fraying the United States’ relations with Ottawa, which, in the months since, has sought to lessen its dependency on Washington.
Premier Doug Ford of Ontario, Canada’s most populous province, on Wednesday night thanked the members of Congress who voted to terminate the emergency declaration, saying they “stood up in support of free trade and economic growth between our two great countries.”
“Let’s end the tariffs and together build a more prosperous and secure future.”
Trump lashed out against House and Senate Republicans on Wednesday, warning that those who vote against his tariffs “will suffer the consequences come Election time,” suggesting that he could interfere with their chances of winning their next primary.
The president argued in a post on his Truth Social platform that tariffs improve the United States’ economic and national security “because the mere mention of the word has Countries agreeing to our strongest wishes.”
“Tariffs have given us Economic and National Security, and no Republican should be responsible for destroying this privilege,” he said. In a second post, Trump said Canada was taking advantage of the United States without providing proof, calling Ottawa “the worst in the World to deal with.”
“TARIFFS make a WIN for us, EASY,” he said. “Republicans must keep it that way!”
Democrats have criticized Trump’s tariffs since they were announced, and now point to economists’ estimates that say the measures — including those imposed against Canada — have increased household costs.
According to the Budget Lab at Yale University, income loss due to Trump’s tariffs, including those imposed on Canada, amounted to about $1,700 per American household last year. The nonpartisan Tax Foundation said the tariffs amount to an average tax increase per U.S. household of $1,000 in 2025 and $1,300 this year.
Though estimates vary, economists generally agree that the tariffs have raised costs for American households.
The U.S.-Canada relationship has greatly degraded during Trump’s second term. Threats to make Canada the United States’ 51st state, his imposition of tariffs and the shifting right of Washington’s foreign and domestic policies have prompted officials in Ottawa to look elsewhere for stable economic partnerships.
Last month, Trump threatened to impose a 100% tariff on Canadian imports in response to Canada seeking to forge a new trade deal with China.
Last October, the U.S. Senate passed a similar resolution to end the emergency declaration related to Canada, but the GOP-led House did not take it up before the end of the congressional session.
In the courts, the legality of Trump’s tariffs is being challenged by multiple lawsuits, with opponents, including states and companies, arguing that the president exceeded his authority in imposing the taxes, which historically are Congress’ responsibility as holder of the purse.
Sen. John Barrasso, R-Wyo., looks on as Senate Majority Leader John Thune, R-S.D., speaks during a press conference after weekly Senate Republican caucus luncheon at the U.S. Capitol on Tuesday. Photo by Bonnie Cash/UPI | License Photo
The world braced for a Washington-made rupture last year. Trade held up, while China flooded many regions with its exports.
The world entered 2025 expecting a trade shock stamped “Made in Washington.” US President Donald Trump vowed to shrink chronic deficits and pledged a tariff-driven reset that would force companies—and trading partners—into new lanes. The shock never fully arrived.
Global commerce kept moving, prices for traded goods didn’t spiral, and exemptions and carve-outs softened the blow. The year still produced a real shift in the trade landscape—just not the one most people were watching for. China’s export engine accelerated, widening its surplus and pushing its cheaper goods deeper into markets in Southeast Asia and Europe, to the concern of those regions.
Meanwhile, the fastest-growing slice of trade wasn’t steel, cars, or containers; it was services. “Trade in services is growing at least twice as fast as trade in goods, and the US is a very important player there,” says Marc Gilbert, who leads the Center for Geopolitics at the Boston Consulting Group (BCG).
The Shock That Wasn’t — And The Shifts Nobody Saw Coming
As the dust begins to settle on a tumultuous 2025, the trade outlook for this year appears calmer. Trump is looking toward the midterm congressional elections, with an electorate fixated on rising prices that his tariffs can only aggravate. Old-fashioned political upheaval could accelerate, though, as the US leader threatens military action in half a dozen countries. “This year should see more economic stability but more geopolitical volatility,” says Cedric Chehab, Singapore-based chief economist at BMI, a subsidiary of Fitch Solutions.
Marc Gilbert, who leads the Center for Geopolitics, Boston Consulting Group
Trump’s 2016 election, followed by the supply chain disruptions of the Covid-19 pandemic, set in motion new megatrends in world trade and international relations: diversification of supply chains to avoid bottlenecks, “China+1” investment—in which companies keep operations in China while expanding production elsewhere—to reduce dependence on Beijing, a US leaning more toward its American neighbors, and South-South trade growing faster than commerce with either of the two superpowers.
All should continue into 2026 unless they don’t: for instance, if Trump decides to tear up the US-Mexico-Canada Agreement (USMCA), which is up for review this year; if China decides the time is ripe to force “reunification” with Taiwan; if Trump reinstates the 10% tariff on Europe that he recently shelved amid European opposition to his Greenland acquisition demands; or if the US Supreme Court, in a case now before it, strikes down the legal strategy underpinning his tariff regime, triggering a torrent of lawsuits by companies seeking refunds of tariffs already paid.
“Every executive in the world is thinking about the balance between efficiency and resilience,” says Drew DeLong, global lead of Geopolitical Dynamics at consulting firm Kearney. “The age of corporate statecraft is beginning.”
Trump turned the world on its head with his April 2 announcement of the eye-popping “Liberation Day” tariffs. By year’s end, the globe was back on its feet, largely because Trump lowered many of his announced duties. The US goods trade deficit fell to multiyear lows in the last few months of the year. But that may have reflected importers drawing down inventories that had swelled ahead of expected tariffs.
For the rest of the world, commerce had a bumper year. According to UN Trade and Development, combined goods and services trade surged by 7% to more than $35 trillion. The price of traded goods rose at a tolerable pace despite rising US levies and actually fell in the fourth quarter. “The rhetoric on trade contraction is way ahead of the data,” says Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics (PIIE).
The US is less important in this picture than it might appear from Washington, accounting for just 16% of global imports, BCG’s Gilbert estimates, although as much as 40% might be “affected” by the No. 1 economy. That includes, for example, components shipped from one Asian country to another for a product ultimately sold in the US.
After US stocks crashed 12% over the week following the April 2 announcement, Trump quickly backpedaled from his Liberation Day targets. Baseline tariffs on major trading partners outside North America—the EU, Japan, and South Korea—settled at 15%-20%. With US manufacturers paying similar rates on imported raw materials or components, the result was something like an even playing field. The Trump administration steadily issued tariff exemptions for irreplaceable imports, including semiconductors and pharmaceuticals as well as coffee and bananas.
China’s Trade Boom
Trump has also made concessions to archrival China, as President Xi Jinping pushed back by threatening to disrupt the flow of essential rare-earth metals. While the US baseline tariff on China remains at 45%, exemptions and carve-outs reduced the effective rate to half that level. “The established trajectory is for the US to end up tariffing other countries as much as China,” says Brad Setser, a senior fellow at the Council on Foreign Relations (CFR) in Washington.
While US policy gyrated, China’s trade trajectory was consistently upward last year. Beijing’s global trade surplus surged by 20% to nearly $1.2 trillion. It offset falling US sales with a more than 10% increase in sales to nations in Southeast Asia, collectively China’s biggest market, and a greater than 8% rise in exports to the EU.
This breakout year capped a decade-long shift in global trade from the US to China. That shift has made export-led growth much more difficult for emerging economies, BMI’s Chehab says. “Ten or 20 years ago, most countries’ largest trading partner was the US, which ran trade deficits,” he says. “Now it is China, which runs surpluses.”
Customers everywhere are seeking instruments to stem the Chinese export tsunami. EU President Ursula von der Leyen has announced a policy of “derisking” from China. Japan is offering “China-exit subsidies” to suppliers who relocate elsewhere. Developing Asian markets are considering sectoral tariffs on steel and strategic products.
Success is unclear. A generation of policy and hard work has made China’s comparative advantage in manufacturing all but unassailable. “Energy prices are quite low, and they can produce on a scale that is incredible,” Chehab says.
China is expanding its dominance into key technologies of the future, particularly those essential for the green-energy transition. Shenzhen-based electric-vehicle champion BYD surpassed US-based Tesla as the global sales leader last year. Total clean-energy exports set new records for the first eight months of 2025, driven by a 75% increase in sales to ASEAN customers, according to industry monitor Ember Energy Research.
The world’s No. 2 economy maintains a lock on other, less flashy but no less essential technologies, from copper alloys to legacy microchips that have become too low-margin to interest Silicon Valley. “Synthetic fibers for apparel, lagging-edge chips: these are the kinds of areas where China says, ‘We are going to win,’” Kearney’s DeLong says.
And then there is the chokehold on rare earths that Xi has already effectively wielded against Trump. “China has got the West over a barrel, as things stand right now,” concludes James Kynge, senior research fellow for China and the World with the Asia-Pacific Programme at the UK think tank Chatham House. “It will take a decade or more to recreate viable parts of the Chinese supply chain in different geographies.”
China could rebalance its trade more effectively through internal policy changes that shift wealth to consumers. Increased purchasing power would boost imports and absorb some excess domestic manufacturing capacity. “The puzzle with China is the absence of imports, whether aircraft or European handbags,” CFR’s Setser says.
The most dramatic effect could come from Beijing instituting pensions and other social-welfare transfers on the model of fully developed economies, PIIE’s Hufbauer says. That does not seem to be on Xi’s agenda. “They do not want to build out a social safety net,” Hufbauer says. “They want to direct resources into frontier technology.”
What Will Happen To The USMCA?
In the US sphere, the main event of 2026 is a review of the USMCA, built into the agreement when Trump signed it during his first term in 2018. The president, true to form, has hinted at annulling the pact, which regulates about 30% of US trade. “We don’t need cars made in Canada. We don’t need cars made in Mexico,” he remarked while touring a Ford Motor factory in Dearborn, Michigan, in January.
Brad Setser, Senior Fellow at the Council on Foreign Relations
But Trump left most USMCA provisions untouched through 2025, and trade watchers are betting the accord will survive with relatively minor changes. US Trade Representative Jamieson Greer struck a more measured tone in congressional testimony in December. “The USMCA has been successful to a certain degree,” he testified. “From the information we have received from interested stakeholders, there is broad support for the agreement.”
“There’s a growing recognition of how important USMCA is,” DeLong says. “The US trade representative received over 1,500 comments from companies. I think it survives with stronger rules of origin and some incentives for specifically US content.”
If so, Mexico could emerge from the current trade upheaval as a big winner, with the North American nearshoring trend accelerating and Mexican President Claudia Sheinbaum toning down her predecessor, Andrés Manuel López Obrador’s, hostility toward business. “This whole story has been great for Mexico,” Hufbauer says. “They’ve improved their position in the US market.”
Over time, the dominance of China and the US in world trade will decline, BCG’s Gilbert predicts. The firm’s 10-year projections show US trade, including services, increasing by 1.5% annually; China’s by 2%; and the rest of the world’s by 2.5%.
One reason is simple arithmetic: India and parts of East Asia are growing faster than China, with explosive potential for both imports and exports. Vietnam’s position as a rising export power seems cemented; its trade volume shrugged off global turmoil, rising nearly 18% last year.
India, so far a domestically focused economy, is the global trade wild card as its economy continues to boom by more than 6% annually and multinational champions like Apple build advanced manufacturing there. “India has improved a lot on infrastructure and the availability of skilled labor,” Gilbert says. “It’s one to watch.”
The EU And Beyond
The world beyond the US and China is also striking back with a wave of diplomacy leaning toward free trade. The EU, sandwiched between Chinese competition and US protectionism, is taking the lead. The EU and India signed a two-way trade agreement on January 27 that slashes tariffs.
Brussels also inked a trade deal with South America’s Mercosur bloc, dominated by Brazil, early this year after a quarter-century of negotiations, although the EU Parliament voted to delay enacting it until it passes a legal review. New Delhi, stung by a 50% tariff Trump imposed as punishment for buying Russian oil, finalized a trade agreement with the UK last year.
London joined the other 11 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in late 2024, after Trump’s reelection. The United Arab Emirates, a rising power in the Middle East, is pushing for free trade with almost everyplace except Washington and Beijing. “Trade deals are happening in months that would have taken decades,” DeLong summarizes.
None of that means the world can easily return to the free-trading consensus that reigned in the decades following the Cold War. The supply chain shocks of the pandemic, China’s political assertiveness, and the working-class resentment across the developed world that Trump channels are pushing toward a new paradigm, though its details remain fuzzy at best. “There’s a positioning of economic security as national security,” DeLong says.
On the other hand, no one can repeal the law of comparative advantage in an ever more complex global economy. Experts’ discussions focus on how trade between nations might shift or slow, not reverse. “When you look at the data, you don’t see too much evidence of a global trade shock,” CFR’s Setser notes.
Within the US, Trump did not visibly turn any clocks back during the first year of his second term. Ed Gresser, director for trade and global markets at the Progressive Policy Institute in Washington, points out that both manufacturing employment and manufacturing’s share of GDP dipped in 2025.
Discontent with China’s export juggernaut might take a back seat in the coming years to fears that US-based internet and AI providers will control the global digital high ground, particularly if Washington continues to use it for geopolitical leverage. “The real growth areas in international trade are data and digitization, and it’s not lost on any nation that the US is a leading provider,” BCG’s Gilbert says.
All of the above leaves decision-makers at multinational corporations in an unenviable position: knowing the deck of world politics and trade is being reshuffled yet not knowing what hand they will ultimately be dealt. “C-suites are embedding geopolitics into strategic and capital allocation decisions in a much more formalized way,” Gilbert says. “But large capital outlays are still in the domain of planning and preparation.”
Notable exceptions were the so-called hyperscalers in AI and their suppliers, who are shelling out capital everywhere at once.
US President Donald Trump has announced he is raising tariffs on South Korean imports to 25% after accusing Seoul of “not living up” to a trade deal reached last year.
In a post on social media, Trump said he would increase levies on South Korea from 15% across a range of products including automobiles, lumber, pharmaceuticals and “all other Reciprocal TARIFFS”.
Trump said South Korean lawmakers have been slow to approve the deal while “we have acted swiftly to reduce our TARIFFS in line with the Transaction agreed to”.
South Korea says it had not been given official notice of the decision to raise tariffs on some of its goods, and wanted urgent talks with Washington over the issue.
It added that South Korea’s Industry Minister Kim Jung-kwan, who is currently in Canada, will visit Washington as soon as possible to meet US Commerce Secretary Howard Lutnick.
South Korea’s benchmark Kospi stock index fell on Tuesday morning but was trading about 1.8% higher later in the day as shares in major exporters recovered.
Seoul and Washington reached a deal last October, which included a pledge from South Korea to invest $350bn (£256bn) in the US, some of which would go to shipbuilding.
The following month, the two countries agreed that the US would reduce tariffs on some products once South Korea started the process to approve the deal.
The agreement was submitted to South Korea’s National Assembly on 26 November and is currently being reviewed. It is likely to be passed in February, according to local media.
Tariffs are paid by companies who import products. In this case, US firms will pay a 25% tax on goods they buy from South Korea.
Trump has frequently used tariffs as leverage to enact foreign policy during his second term in the White House.
On Saturday, he threatened Canada with a 100% tariff if it struck a trade deal with China.
On Monday, Chinese officials said its “strategic partnership” agreement with Canada is not meant to undercut other countries.
Canadian Prime Minister Mark Carney has said his country was not pursuing a free trade deal with China and has “never” considered it.
He added that Canadian officials have made their position clear to their American counterparts.
Before that, Trump said he would impose import taxes on eight countries – including the UK – who opposed US plans to seize Greenland, an autonomous territory in the Kingdom of Denmark which is a member of Nato.
He later backed down from the tariff threat over Greenland citing progress towards a “future deal” over the island, but the episode strained US relations with Denmark and other Nato allies.
