Trump’s Tariff Offensive Reshapes Global Trade: Realignments, Retaliations, and the Road to a New Economic Order

In April 2025, global trade faces its most tumultuous reset in a generation. President Donald Trump, now in the early months of his second term, has doubled down on the protectionist instincts of his first term with an unprecedented array of tariffs and trade barriers. These measures mark a sharp departure from the post-World War II norm of steadily liberalizing trade – instead harkening back to an era of high tariffs and economic nationalism. The timing and scale of Trump’s tariffs have rattled the international economic order. The International Monetary Fund (IMF) warns that the world economy is entering a period of significant uncertainty, trimming its 2025 global growth forecast to 2.8%, down from 3.3% in 2024. Global merchandise trade had just hit a record $33 trillion in 2024 (growing 3.7% that year), but that momentum slowed in late 2024 and “uncertainty looms in 2025 as shifting policies reshape the global landscape”. Trump’s sweeping tariff actions – dubbed by some as “Liberation Day” tariffs – have only amplified that uncertainty, threatening to spark an all-out trade war across multiple fronts.

Against this backdrop, this article examines the current and future trajectory of global trade under Trump’s tariff regime as of April 2025. We begin by detailing the tariff policies currently in effect, including their scope, targets, and stated strategic intent. Next, we provide a global overview of responses from key countries and economic blocs – from China’s fierce retaliation to the more cautious negotiations pursued by the European Union and others. We then offer forecasts of likely outcomes of these standoffs, assessing which parties are likely to concede and which will hold firm, and on what terms deals might be struck. An important dimension is the role of China’s counter-pressure: we analyze which countries might “cave” to Chinese pressure aimed at dissuading cooperation with the U.S. tariff agenda. Finally, we explore the contours of a potential global economic and political reset that could emerge post-confrontation – including the possibility that the world is sliding into a new Cold War-style bifurcation, with competing U.S.-led and China-led blocs forming around trade, technology, and finance.

Throughout the analysis, we draw on real data as of April 2025 and incorporate plausible forecasts based on current trends. We include data tables summarizing tariff levels and trade flows, and visual charts to illustrate key trends (tariff changes over time, shifts in trade volumes, and emerging global blocs). The goal is to provide a comprehensive assessment of how Trump’s tariffs are redrawing the map of global commerce, and what lasting legacy these trade battles might leave on the world economy and geopolitical order.

Trump’s Second-Term Tariff Policies: Scope and Intent

Tariffs in Effect (April 2025). President Trump has unleashed a cascade of new tariffs in the opening months of 2025 that dramatically raise U.S. import costs across the board. The signature move was an executive order on April 2, 2025 invoking emergency economic powers to impose a universal 10% tariff on all countries exporting to the United States. This 10% across-the-board tariff took effect on April 5, 2025 and applies to virtually all imported goods, representing a seismic shift from the pre-2025 average U.S. tariff of about 2.5%. In fact, in the span of January to April 2025, the average effective U.S. tariff rate has skyrocketed from roughly 2.5% to an estimated 27% – the highest level in over a century. Figure 1 illustrates the sharp rise in U.S. tariff rates during Trump’s second term compared to recent years (2017–2025).

Concurrently, Trump targeted specific countries with “individualized reciprocal” tariffs far above the 10% baseline. Beginning April 9, 2025, 57 countries with which the U.S. runs its largest trade deficits were hit with punitive rates on top of the base tariff. These country-specific tariffs range from an additional 11% (for Cameroon) up to 50% (for Lesotho), with major trading partners like China, the European Union, India, Japan, and others facing steep surcharges (Table 1). The White House derived these rates from a formula linking each country’s tariff to the size of its bilateral goods trade deficit with the U.S.. In essence, the Trump administration argues that countries with bigger trade surpluses vis-à-vis the U.S. have been engaging in more “unfair” practices, warranting higher tariffs to force a rebalance.

Table 1: U.S. Tariff Rates on Selected Partners (Before vs. After Trump’s 2025 Actions)

Trading Partner	U.S. Tariff Rate (Jan 2025)	U.S. Tariff Rate (Apr 2025)	Notes
All Countries (avg.)	~2.5% (MFN average)	10% base + (varies)	10% universal tariff from Apr 5.
China	~20.8% (Phase-1 era)	145% (effective)	Raised in stages Feb–Apr (total +125 pct pts).
European Union	~3% (mostly MFN zero)	20%	10% base + 10% reciprocal (EU-wide).
Mexico	0% (USMCA)	0% or 25%	USMCA goods exempt; others 25% (border security tariff).
Canada	0% (USMCA)	0% or 25%	USMCA goods exempt; others 25% (border security tariff).
Japan	<3% (some steel tariffs)	24%	10% base + 14% reciprocal.
India	~5% (various)	26%	India signaled willingness to negotiate tariff down.
South Korea	<3% (some steel tariffs)	25%	Major auto/tech exporter; likely negotiating relief.
Vietnam	~5%	46%	Among highest; aimed at shifting supply chains.
Least Developed	0–5% (AGOA/GSP)	10% base (paused)	Many LDCs initially listed for reciprocals, then paused.

Sources: Pre-2025 tariffs are MFN rates and Phase-1 China deal rates. April 2025 rates from White House Annex I and official statements. USMCA (Canada, Mexico) special cases from White House fact sheet. China’s 145% from NPR/Commerce Ministry.

As shown above, China is by far the most heavily targeted: by April 2025, the U.S. had ratcheted up tariffs on Chinese goods to a baseline of 145% – an almost unheard-of level in modern trade history. This reflects additional China-specific hikes (10 percentage points in February, another 10 in March, then a whopping +74 and +41 points in April via the reciprocal tariff formula). All told, U.S. tariffs on all imports from China now average 124.1%, more than 40 times higher than before the trade war began in 2018. According to PIIE data, the second Trump administration alone has raised the average U.S. tariff on Chinese goods by 103.3 percentage points, far eclipsing the tariff escalation seen in Trump’s entire first term. This dramatic spike is partly why, as of April, the overall U.S. tariff on all imports (from all countries) jumped to over 10% on average, with many allies and neutral nations caught in the dragnet along with rivals.

It is important to note exemptions and pauses in this tariff regime. Certain critical products are exempt from the new duties, either for economic or strategic reasons. The White House explicitly excluded imports of semiconductors from any new ad valorem tariffs after industry backlash – any duties inadvertently collected on semiconductors are to be refunded. Other exemptions cover some raw materials and essential goods: e.g. steel, aluminum, autos and parts were already subject to separate Section 232 tariffs (25% on steel/10% on aluminum since March 2025, applied globally without exemptions), and these items are not double-taxed by the reciprocal tariffs. Pharmaceuticals, critical minerals (like rare earths, which the U.S. needs for high-tech manufacturing), and energy products are also largely exempt or have capped rates. Additionally, Canada and Mexico – America’s USMCA partners – received carve-outs tied to ongoing bilateral issues: so long as separate national security tariffs related to fentanyl and migration remain in effect, USMCA-compliant goods face 0% tariffs, whereas non-compliant goods face 25%. In practice, this means North American supply chains are disrupted less than others, with the burden falling on goods that don’t meet rules of origin or fall outside trade agreement quotas.

Moreover, President Trump announced a “90-day pause” on the full implementation of the harshest reciprocal tariffs (excluding China) shortly after they were unveiled. From April 9 to July 8, 2025, the administration is applying a temporary 10% cap on the country-specific tariffs (effectively extending the base rate to those 57 countries for 90 days) while negotiations are underway. This pause is effectively a bargaining window: if U.S. trade partners come to the table to address U.S. concerns (or if other geopolitical goals are met), the additional tariffs might be reduced or lifted; if not, the full scheduled tariffs (as per Table 1) would kick in after July 8. China, notably, was excluded from this grace period – its 145% tariff burden remains fully in force with no pause. The divergent treatment underscores the administration’s strategy: isolate China as the primary adversary in the trade war, while giving other countries a chance to make concessions and avoid being pushed into China’s camp.

Strategic Rationale behind the Tariffs. President Trump has justified this sweeping tariff regime on both economic and national security grounds. In official proclamations, the administration argues that large, chronic U.S. trade deficits constitute a “national emergency” that threatens America’s industrial base and sovereignty. The core philosophy is one of “reciprocal trade”: the President insists other nations must treat U.S. exports the same way the U.S. treats theirs – if a country has higher tariffs or barriers, the U.S. will match or exceed them. Trump’s trade team points to a litany of what they deem unfair practices abroad, including: tariff asymmetries (foreign tariffs higher than U.S. tariffs), currency manipulation, VAT tax schemes that disadvantage U.S. firms, subsidies, dumping, and intellectual property theft. A list circulated by Trump in April enumerated eight non-tariff ways countries “cheat” the U.S., from currency manipulation to banning genetically modified crops and tolerating counterfeit goods. By imposing tariffs unilaterally, Trump seeks to coerce trading partners into abandoning these practices or offsetting their effects.

Strategically, the 10% global tariff is meant as a blunt instrument to reset the playing field. It signals that no country is exempt from Trump’s “America First” push for balanced trade. However, the graduated reciprocal tariffs are designed to exert maximum pressure on specific nations that the Administration views as chronic offenders – most prominently China, but also several emerging economies and even traditional allies if they run surpluses with the U.S. The White House fact sheet explicitly frames this as adjusting for the “injustice” of non-reciprocal trade that has “empowered non-market economies like China” and “hurt America’s middle class”. By raising the cost of access to the U.S. market, Trump hopes to reshore manufacturing and force supply chains to reorient towards domestic or allied production. Indeed, U.S. officials argue these tariffs will incentivize foreign companies to invest in producing inside the United States (to avoid tariffs) and encourage American companies to source domestically, thereby revitalizing factories and jobs at home.

There is also an element of geopolitical strategy. The tariff arsenal is being used as leverage not just for economic reciprocity but to advance non-trade objectives. For instance, the separate 25% tariffs on Mexican and Canadian goods that don’t meet USMCA rules are explicitly tied to issues of drug trafficking and illegal immigration across the U.S. border. Trump has framed some tariffs on neighbors as necessary to hold those countries “accountable” for stopping the flow of fentanyl and migrants. Similarly, the administration has hinted that cooperation on national security matters (e.g., aligning with U.S. sanctions on adversaries, restricting technology transfers to China, etc.) could earn tariff exemptions. The April 2 executive order includes language allowing tariffs to be decreased for countries that “align with the United States on economic and national security matters”. This suggests a carrot-and-stick approach: punitive tariffs serve as the stick, while the carrot is potential relief if countries support U.S. strategic aims (whether that be buying more American goods, or taking America’s side in broader geopolitical contests).

In sum, Trump’s second-term tariff policy as of April 2025 is sweeping in scope and assertive in intent. It has upended the low-tariff status quo, with average U.S. import duties now at levels not seen since the 1920s-1930s. The official goals are to reduce the U.S. trade deficit (which topped $1.2 trillion in goods in 2024), protect vital industries, and force trading partners to play by U.S. rules. Whether this tariff shock therapy will achieve those goals – or instead provoke retaliation and economic pain – is the central question the world is now grappling with. The next sections examine how key countries are responding and what trajectory global trade might take as a result.

Global Responses: Retaliation, Negotiation, and Realignment

Trump’s tariff gambit has elicited a range of responses around the world, from swift retaliation by rivals to strategic engagement by allies. Here we provide a region-by-region overview of how major economies and blocs are reacting, based on developments through April 2025.

China: Retaliation and Resilience.  China has responded to Trump’s escalation with equally drastic countermeasures, signaling no intention of backing down. Within days of Trump’s April tariff hikes, Beijing retaliated with its own massive tariffs on U.S. goods – 125% tariffs on American exports across a wide array of products. In effect, China has also now raised its average tariff on U.S. imports into the triple digits, mirroring the U.S. stance. Beijing’s retaliation has been broad-based: everything from U.S. agricultural products (grains, soy, pork) to manufactured goods (autos, machinery) to consumer goods (including even Hollywood films) are facing steep surcharges. Moreover, China has weaponized its control of critical raw materials, notably rare earth elements, which are essential inputs for high-tech industries. Beijing moved to restrict exports of rare earths to the U.S., an ominous sign for sectors like electronics, electric vehicles, and defense contracting that rely on these materials. By choking off supply (at least temporarily – reports indicate China halted all exports pending new licensing rules), China is reminding Washington of its leverage in global supply chains for specialized inputs. This echoes China’s actions a decade earlier in other disputes, and adds pressure on U.S. companies that depend on Chinese-sourced components.

Politically, China has adopted a defiant yet calculated tone. President Xi Jinping and other Chinese leaders have publicly stated that China “is not afraid” of a trade war and will not be bullied into concessions. The rhetoric from Beijing emphasizes self-reliance and economic resilience, with calls to accelerate China’s drive to develop indigenous technology and domestic demand so as to reduce vulnerability to U.S. pressure. At the same time, China has expressed some openness to dialogue – Chinese officials have not shut the door on negotiations entirely, and lower-level talks are reportedly ongoing. However, Beijing insists that any talks be on equal footing and has warned it will take “corresponding countermeasures” if it perceives that other countries’ deals with the U.S. come at China’s expense. For example, China’s Ministry of Commerce in April explicitly cautioned other nations against striking bargain deals with Washington that might isolate or undercut China, vowing retaliation if that occurs. This is a clear message aimed at U.S. allies and trading partners: do not side with the U.S. to China’s detriment, or face Chinese sanctions or loss of access to China’s huge market.

In terms of economic impact, China’s strategy is to weather the storm while mitigating damage to its growth. The tariffs undoubtedly hurt export-oriented industries in China (many factories in Guangdong and Zhejiang provinces report slumping U.S. orders). But Beijing is deploying stimulus domestically and seeking alternative export markets in Asia, the Middle East, and Africa to compensate. China is deepening trade ties within the Regional Comprehensive Economic Partnership (RCEP) and via its Belt and Road Initiative partners. Notably, Xi Jinping has been courting leaders in Europe and Southeast Asia this spring – meeting with Spain’s Prime Minister, and planning visits to Vietnam, Malaysia, and Cambodia – to reinforce economic links. Such diplomacy is aimed at redrawing alliances and ensuring China is not isolated; Beijing is effectively trying to build a counter-coalition of countries willing to continue business with China despite U.S. pressure. In summary, China’s response blends retaliation (tariffs, export bans), resilience measures (stimulus, supply chain diversification), and diplomatic outreach to counter U.S. efforts. The stage is set for a protracted U.S.-China showdown, as neither side appears ready to concede core demands.

European Union: Negotiating under Duress. The European Union (EU) has been caught in a delicate position by Trump’s tariffs. On one hand, the EU is a close U.S. ally and does not want an all-out trade war with Washington. On the other hand, Europe sees Trump’s across-the-board tariffs (including the 10% on all EU goods, plus an extra ~10% “reciprocal” tariff for the EU as a whole) as unjustified and WTO-illegal. Initially, the EU signaled it was prepared to retaliate with its own tariffs on U.S. exports, and it drew up lists of American products (from Harley-Davidson motorcycles to Kentucky bourbon, mirroring the 2018 trade skirmish) to target. “The European Union has said it’s prepared to retaliate,” NPR reported in mid-April. However, EU officials have so far held off on immediate retaliation, instead expressing willingness to negotiate a solution. Brussels has engaged in intensive talks with the U.S. Trade Representative to seek exemptions or a deal similar to past arrangements (for instance, the managed trade quota deal that resolved the 2018 steel tariff issue between the U.S. and EU). The 90-day pause that Trump offered (which includes EU countries) provides a window for such negotiations.

Europe’s approach has been two-pronged: diplomacy coupled with legal action. Diplomatically, top EU trade officials and even leaders like France’s Emmanuel Macron and Germany’s Olaf Scholz have been in communication with Washington, aiming to defuse tensions. There are discussions of an EU-U.S. agreement that could address some U.S. grievances – for example, the U.S. is pushing the EU to lower its tariffs on American cars and agriculture (like France’s ban on GM corn was explicitly called out by Trump. The EU might be willing to make limited concessions (e.g., buying more American liquefied natural gas or adjusting some regulatory barriers) to placate Trump. In return, the EU’s goal would be securing a permanent exemption from the reciprocal tariffs, much as Canada and Mexico did via USMCA provisions. There is also speculation of a revived effort at a U.S.-EU trade pact – not unlike the shelved Transatlantic Trade and Investment Partnership (TTIP) – focusing on industrial tariffs and standards, which could be presented as a win-win to remove Trump’s tariffs and improve “reciprocity.”

At the same time, the EU has turned to the World Trade Organization (WTO). In February and March, as Trump’s plans became clear, the EU filed disputes at the WTO challenging the U.S. tariffs as violations of most-favored-nation (MFN) obligations and other rules. Several U.S. justifications (national security via IEEPA and Section 232) are being scrutinized; the EU argues that using a “national emergency” pretext for a blanket tariff is an abuse of trade rules. Of course, the WTO’s dispute system is partly paralyzed (with the Appellate Body non-functional due to earlier U.S. obstruction), so these legal moves are more symbolic and to pressure the U.S. domestically. European officials also coordinated with other affected partners (like Japan, Korea, and even some developing countries) to present a united front in Geneva against the U.S. actions.

Politically, the tariff flare-up has stirred anti-Trump sentiment in Europe and strengthened resolve to not be seen as caving completely. Yet European economies – especially export powerhouses like Germany – are wary of lost access to the U.S. market. The EU is thus likely to seek a compromise: offer enough (in terms of market access or joint initiatives on, say, WTO reform against China’s practices) so that Trump can claim victory and drop the tariffs. If talks fail by July, the EU may activate its retaliation list, which could impose billions in duties on U.S. exports, potentially triggering further escalation. European leaders clearly prefer to avoid that scenario.

Canada and Mexico: Caught in the Crossfire, Preserving USMCA.  America’s immediate neighbors, Canada and Mexico, have arguably been collateral damage in Trump’s tariff crusade. Both countries negotiated the USMCA free trade agreement (which replaced NAFTA) with Trump in 2018–2020, presumably securing stable tariff-free access to the U.S. market. However, Trump’s second-term trade moves endangered that stability. In early 2025, Trump slapped a 25% tariff on most goods from Canada and Mexico under a separate set of executive orders (framed as combating illicit drugs and weak border control). This provoked swift backlash: Ottawa and Mexico City were outraged, considering it a violation of USMCA spirit. Within weeks, facing political pushback domestically and abroad, Trump modified his stance – granting indefinite exemptions for USMCA-compliant goods from Canada/Mexico. As noted, currently all Canadian and Mexican goods that meet USMCA rules of origin are tariff-free, while non-compliant goods (e.g., a Chinese-made component transshipped through Mexico) face 25%. Additionally, specific carve-outs were made: e.g., Canadian oil and potash face a lower 10% tariff under a special cap.

Despite these adjustments, the initial shock damaged trust. Canada responded by preparing counter-tariffs on U.S. exports (likely targeting Republican-heavy industries, as in past disputes). Some reports indicate Canada “hit back” with its own tariffs in the interim, though these were mostly symbolic surcharges on a few U.S. consumer goods. Politically, Canadian leaders also reached out to Congress: in the U.S., bipartisan opposition to tariffs on close allies emerged, with Republican and Democratic senators rebuking Trump’s Canada tariffs as harmful and unjust. This domestic pressure – four GOP senators joined Democrats in a formal condemnation – likely contributed to Trump’s partial climb-down on Canada/Mexico. Mexico, for its part, threatened to walk away from cooperation on migration control (a key Trump ask) if the tariffs persisted. This may have also helped bring Trump to the table to shield most North American trade from the new duties.

Currently, both Canada and Mexico are negotiating from within the USMCA framework to ensure continued exclusions from Trump’s global tariffs. They have pointed out that USMCA’s legal text doesn’t explicitly forbid such tariffs, but they argue it violates the spirit. They are seeking side agreements or understandings that U.S. tariffs will not apply as long as the countries maintain certain policy cooperation (e.g., on fentanyl precursors in Mexico’s case). In essence, Canada and Mexico are managing Trump – using diplomacy and targeted retaliation threats to secure their interests. They have an advantage in that U.S. industries (auto manufacturers, farmers) strongly rely on North American integration and have lobbied Trump to spare Canada/Mexico. Going forward, we expect Canada and Mexico to remain largely exempt (to avoid derailing USMCA), but tensions could flare if Trump expands tariffs to, say, energy or if either country is seen as a conduit for Chinese goods. Overall, they aim to preserve the tariff-free status quo under USMCA while quietly coordinating with other U.S. allies in pushing back against the general tariff strategy.

Japan and South Korea: Ally Diplomacy and Sectoral Deals.  Japan and South Korea, two key U.S. allies in East Asia, have responded to Trump’s tariffs with low-key diplomacy and tactical concessions. Both countries were listed among the 57 facing reciprocal tariffs (Japan at 24%, Korea at 25% additional). This was a shock given their alliances with the U.S. Japanese Prime Minister Fumio Kishida quickly dispatched envoys to Washington to seek an exemption, emphasizing Japan’s large investments in U.S. manufacturing and joint security interests (such as confronting North Korea and China). South Korea’s trade minister similarly entered urgent talks, reminding the U.S. of Korea’s role in critical supply chains (like semiconductors and EV batteries) and that punishing Korea could inadvertently hurt U.S. industries.

By April 6, India and by extension other Asian nations signaled they would negotiate rather than retaliate. While that reference was India, Japan and Korea took a similar stance – neither Tokyo nor Seoul announced retaliatory tariffs. Instead, they hinted at addressing U.S. concerns. For Japan, a likely outcome is a side deal on automobiles: Trump has long complained about Japan’s market being closed to U.S. cars and threatened auto tariffs. In response, Japan may agree to voluntary export restraints or new investments in U.S. auto plants to avoid a punitive tariff on Japanese cars (which would devastate Toyota, Honda, etc.). Something akin to the 1980s Japan-U.S. auto agreement could emerge, where Japan “voluntarily” limits auto exports or increases purchase of U.S. agricultural products as a quid pro quo. Japan might also join U.S. efforts on strategic tech controls (for example, aligning with U.S. restrictions on chip technology to China) as a show of goodwill.

South Korea, which has a trade agreement with the U.S. (KORUS FTA), is leveraging that framework. Korea could point out that it already lowered many tariffs under KORUS and might seek a waiver by highlighting how Korean firms (like Samsung, Hyundai) invest heavily in the U.S. The U.S. may push Korea to further open its market to American farmers (always a sticking point, e.g., beef, rice) or to coordinate on currency (the U.S. has accused Korea of past currency intervention). Seoul may acquiesce to some demands in exchange for avoiding the full 25% tariff. Indeed, Korea was reportedly considering not joining any WTO complaint and instead quietly working out an agreement with USTR.

Both Japan and Korea are motivated to maintain solidarity with the U.S. against a rising China, so they are unlikely to openly clash with Washington over trade. However, there is domestic pressure in both countries not to appear too weak. So their governments might secure at least partial concessions – say, a reduction of the reciprocal tariff rate (maybe Japan’s 24% could be cut to the 10% base, effectively exempting them) – and present that as a win. By late April, there were hints that the U.S. was considering case-by-case exemptions for “friends.” For example, India’s prompt engagement led the U.S. to hold off on applying the full 27% reciprocal tariff to India. Japan and Korea likely seek a similar outcome. In summary, these allies are balancing: they won’t retaliate aggressively (to preserve the alliance), but they will negotiate sector-specific arrangements to blunt the impact of Trump’s tariffs on their economies.

India: Opportunity Amid Conflict.  India’s response to Trump’s tariffs has been notably accommodative, seeing in the crisis an opportunity to enhance its trade ties with the U.S. India was tagged for a 26% reciprocal tariff, but as cited earlier, by early April India signaled it would not retaliate and instead pursue negotiations. Prime Minister Narendra Modi’s government has positioned India as a potential alternative supplier to the U.S. market for goods that were coming from China. If U.S.-China trade collapses under 145% tariffs, India hopes to capture some of that market share – for example, in textiles, apparel, machinery, and IT services. Thus, India has a strong incentive to stay on Trump’s good side.

Negotiations between the U.S. and India have focused on long-standing irritants: U.S. complaints about India’s high tariffs (India traditionally has high duties on Harley-Davidson motorcycles, dairy, medical devices, etc.) and India’s requests for more access for its workers (H1B visas) and exports (garments, generic drugs). There are indications that a mini trade deal could be struck: India might agree to reduce tariffs on certain American goods and tighten its intellectual property rules, while the U.S. could drop the reciprocal tariff and perhaps restore some benefits (like reinstating India’s eligibility for the Generalized System of Preferences, GSP, which Trump revoked in 2019). The April pause works in India’s favor to negotiate this. Already, India did not impose any new duty against U.S. goods and even deferred some planned digital services tax that irked the U.S., as a goodwill gesture.

Strategically, India is also leveraging the situation to further distance itself from China. The U.S. has been courting India as a key part of its Indo-Pacific strategy (through the Quad alliance, etc.). India’s refusal to side with China on the trade war – instead taking advantage of China’s predicament – aligns with its broader strategic interest of countering Chinese influence in Asia. However, India must also balance its own relationship with China (a major trade partner and neighbor). So New Delhi’s tone is careful: officially it says it stands for open trade and hopes the U.S.-China dispute is resolved, but quietly it is moving closer to the U.S. position. We project that India will likely succeed in getting its tariff rate lowered or exempted in exchange for moderate concessions. This could position India as a big winner in a diverted trade scenario: if U.S. imports from China drop sharply, India could see increased exports to the U.S. fill some gaps, especially if its goods are not facing the same high tariff.

ASEAN and Other Southeast Asia: Divided Paths.  The ten nations of ASEAN (Southeast Asia) have varied exposure and responses to Trump’s tariffs. Some, like Vietnam, Malaysia, Thailand, and Indonesia, were on the list of 57 with significant tariffs (Vietnam at a hefty 46%, Malaysia 24%, Thailand 36%, Indonesia 32%). These export-dependent economies are concerned. Vietnam, in particular, has become a major exporter to the U.S. in recent years (often as a substitute for China in light manufacturing). A 46% tariff threatens to undercut Vietnam’s booming exports of electronics, apparel, and furniture to the U.S. As a result, Vietnam has been in active talks with U.S. officials. Hanoi is trying to prove that it isn’t intentionally running a big surplus – many of its exports to the U.S. are actually produced by multinational (including American) companies operating in Vietnam, after shifting from China. Vietnam may offer to crack down on any transshipment of Chinese goods being rerouted through Vietnam to dodge tariffs (a practice the U.S. suspects). It might also consider devaluing its currency less (the U.S. Treasury had previously labeled Vietnam a currency manipulator in 2020). By showing cooperation, Vietnam hopes to be spared the worst. Indeed, Vietnam’s importance as a pro-U.S. partner in Asia (it shares wariness of China) could help it negotiate an outcome where the tariff is reduced or phased out.

Malaysia and Thailand have similarly reached out to negotiate. They have smaller surpluses, but they don’t want to lose access for products like Thai electronics or Malaysian palm oil, etc. Some ASEAN countries like Singapore and Philippines were not on the high-tariff list (Philippines got 17%, relatively low; Singapore wasn’t singled out). They have thus less direct impact but worry about the overall climate of U.S. protectionism. The Philippines under President Marcos Jr. is actually aligning closer to the U.S. (both for security and economic reasons), and might see relatively favorable treatment. The Philippines’ 17% tariff is modest, and Manila has been quiet about it publicly, likely hoping it quietly goes away as U.S. focus is elsewhere.

On the other end, Cambodia, Laos, and Myanmar – countries economically linked with China and less aligned with the U.S. – have not been vocally protesting Trump’s tariffs (some are subject to them, e.g., Cambodia 49%, Laos 48%). They may actually pivot more toward China as the U.S. market becomes less accessible. For instance, Cambodia’s garment industry, heavily exporting to the U.S., could suffer under tariffs, pushing Phnom Penh to seek even more Chinese investment to compensate. Indonesia has a large diversified economy; it faces a 32% tariff, and President Jokowi has decried it but is also using it to redouble efforts to move up the value chain (Indonesia has banned some raw mineral exports to force domestic processing – ironically similar in spirit to Trump’s protectionism). Overall, within ASEAN there’s a split: more U.S.-aligned states (Vietnam, Philippines, Singapore, Malaysia) are trying to engage and perhaps benefit from China’s woes by staying friendly with Washington, whereas more China-leaning states (Cambodia, Laos, maybe Myanmar) are standing with Beijing’s criticisms of U.S. tariffs.

ASEAN as a bloc has called for multilateral solutions and warned that the trade war could “hurt everyone”, but the bloc is not unified enough to collectively bargain with the U.S. Thus, expect country-specific outcomes: some Southeast Asian nations will negotiate partial tariff relief (especially Vietnam and maybe Malaysia), while others will face the new levies and lean more on China or regional trade (ASEAN’s own free trade area and RCEP) to make up losses.

Latin America (beyond Mexico): Between U.S. and China.  Latin American countries have experienced indirect effects of the U.S. tariffs and are positioning themselves carefully. Brazil, the region’s largest economy, surprisingly was not listed among the 57 tariff targets, despite the U.S. historically running a deficit in certain goods with Brazil. This may be due to Brazil’s importance in commodities (where the U.S. might not want to disrupt imports of soy, iron ore, etc., as that could raise U.S. input costs). It might also be a political calculation: Brazil under President Lula has repositioned itself as a leader of the Global South and ally of neither Washington nor Beijing exclusively. Lula has, for instance, increased trade talks with China (recently agreeing to trade in yuan for some transactions) and simultaneously sought good relations with the U.S. Brazil was affected by the reinstated steel tariff of 25% (Trump removed an earlier exemption for Brazil on steel in March 2025). That upset Brasilia, and Brazil has lodged a WTO complaint as well. But Brazil has not been hit by the reciprocal deficit tariffs yet. Lula has used this moment to champion a narrative of developing countries needing to band together; he criticized Trump’s tariffs as “neocolonial economics” in a speech. However, Lula also sees an opening: if China-U.S. trade shrinks, China will buy fewer U.S. farm goods, potentially buying more from Brazil (for example, China already pivoted to Brazilian soybeans during earlier U.S. tariffs). Likewise, the U.S. might seek alternative suppliers for goods now priced out from China – possibly turning to Brazil for things like steel, or to other Latin countries for goods like electronics or apparel. So Brazil is watching and might benefit from trade diversion.

Other Latin countries: Central America and the Caribbean nations mostly don’t run big surpluses with the U.S. and weren’t primary targets, but some (like Nicaragua, 18%, Venezuela, 15% in Annex) were included more for political reasons (Nicaragua and Venezuela are adversarial regimes from the U.S. perspective). Venezuela specifically was hit with a fresh 25% tariff on its oil exports to the U.S. in March 2025 (though the U.S. barely buys Venezuelan oil due to sanctions). That was more symbolic, reinforcing U.S. hardline stance. Countries like Colombia, Chile, Peru – U.S. trade partners – are not directly tariffed by Trump’s new measures (they don’t have big deficits with the U.S.), but they are nervously monitoring global commodity prices and demand. If the world economy slows due to the trade war, demand for their exports (copper from Chile, oil from Colombia, etc.) could fall.

Mexico we covered; Argentina has its own economic crisis and doesn’t export much to the U.S. in manufactured goods (mostly commodities), so not a focus of Trump’s tariffs beyond steel. Chile actually stands to gain if China turns more to South America for commodities; indeed, China might reward countries that stay neutral by buying more from them. In Latin America, there’s also the element of Taiwan vs China – some Central American countries recently switched diplomatic recognition to Beijing; China could punish those that cozy up to the U.S. trade stance by, say, curtailing infrastructure investments.

In summary, Latin America is not monolithic: some countries might gain from U.S.-China tensions (commodity exporters could fill gaps), while others fear being squeezed out of the U.S. market if tariffs cause U.S. buyers to cut imports (for instance, if U.S. consumers face higher prices, they may reduce purchases of goods from everywhere, not just China). The region overall has called for dialogue and kept a lower profile in the tariff fight, aligning loosely with the “Global South” perspective that the U.S.-China trade war is a threat to global growth and should be resolved through the WTO or G20.

Other Economies and blocs:

• Africa: Many African nations benefited from duty-free access to the U.S. under AGOA (African Growth and Opportunity Act). Trump’s blanket tariffs technically applied even to those, though the U.S. Trade Representative hinted that least-developed countries might eventually be exempted due to their minimal share of U.S. trade. Initially, over two dozen African and least-developed countries were caught in the 57-country list despite each contributing less than 0.1% to the U.S. trade deficit. After criticism that penalizing the poorest countries was counterproductive, the U.S. indicated flexibility – and indeed, the 90-day pause halts additional tariffs on AGOA beneficiaries for now. The African Union has urged the U.S. to exclude Africa entirely, pointing out that African exports to the U.S. (mostly raw materials and apparel) pose no threat to U.S. industry but are vital for African economies. We anticipate the U.S. will relent for many African nations, keeping their tariff at 10% or returning to 0% for AGOA-eligible goods, especially as the U.S. doesn’t want to push them toward China’s embrace. Meanwhile, China is actively reminding Africa of its support, contrasting with U.S. protectionism.

• Middle East: Countries like Israel (17%), Saudi Arabia (not listed, as U.S. runs deficit in oil), Turkey (not explicitly in list) have reacted differently. Israel, a close ally, quietly sought an exemption (Israel’s 17% tariff likely will be waived given strategic ties). The Gulf states, major oil exporters, ironically benefited from higher oil prices earlier, and since energy was often exempt or at 10%, they are not heavily hit. Turkey, which the U.S. often has trade frictions with, was not on the initial list likely because trade is roughly balanced; however, Turkey has been involved in its own disputes (e.g., digital services tax issues). In general, Middle Eastern countries are hedging – they want to keep trading with both U.S. and China and are hoping to stay out of the line of fire. Some, like the UAE and Saudi Arabia, are deepening trade ties with China (part of China’s attempt to form a bloc) but also maintaining security ties with the U.S., thus trying to avoid choosing sides.

In conclusion of this section, the global response to Trump’s tariffs has been intense and varied: China has retaliated proportionally and seeks to marshal a counter-coalition; U.S. allies (EU, Japan, etc.) are negotiating hard to soften the blow while avoiding full confrontation; many emerging economies are striving to adapt, some courting the U.S. for favored status (India, Vietnam), others leaning on China or multilateral forums for support. The next section will analyze how these maneuvers might play out – who is likely to strike deals or fold, and who will remain at an impasse – and the potential outcomes of the ongoing negotiations.

Forecasting Outcomes: Winners, Losers, and Likely Deals

With the tariff battles lines drawn, we turn to forecasting the probable outcomes of ongoing negotiations and standoffs. Barring a dramatic reversal in U.S. policy, the following scenarios with high likelihood emerge:

Likely Concessions and Deals. Several countries and blocs appear poised to reach accommodations with the U.S., granting Trump at least partial victories in return for relief from tariffs:

• European Union – Partial Deal: The EU is expected to avoid an all-out trade war by making targeted concessions. A likely outcome is a mini trade agreement where the EU lowers tariffs or eases quotas on certain U.S. exports (perhaps beef, ethanol, or automobiles – sectors long blocked in Europe) and agrees to cooperate on WTO reform to address “China’s unfair trade practices,” aligning with a key Trump concern. In exchange, the U.S. would remove the reciprocal tariff on EU goods (bringing Europe effectively back to normal MFN zero tariffs for industrial goods). Both sides might declare victory: Trump could claim Europe “agreed to treat us fairly” and point to increased U.S. exports, while the EU could say it defended the multilateral trading system from a major rupture. The timeline for such a deal is likely before the 90-day tariff pause expires in July. We anticipate European cars will escape new U.S. tariffs (defusing a big threat to Germany), and European retaliatory tariffs will be shelved. However, the EU will not concede on core principles like its regulatory standards or VAT system, meaning some U.S. complaints will remain unresolved. The deal will thus be modest, possibly leaving agriculture still contentious (France will resist large agri imports, for instance). But it should suffice to remove the immediate tariffs and avoid EU-U.S. escalation. This outcome has high likelihood given strong economic incentives on both sides to maintain transatlantic trade flows (the EU and U.S. each other’s largest trading partners).

• Japan and South Korea – Sectoral Relief: Japan will likely avert the 24% tariff by a side agreement focusing on the auto sector. We expect Japan might agree to voluntarily limit auto exports to the U.S. at a certain level or invest more in U.S. auto plants, and perhaps purchase more U.S. agricultural goods (like wheat, beef). In return, the U.S. would exempt Japan from the reciprocal tariff or cap it at 10%. Similarly, South Korea may strike a deal possibly involving increased quotas for U.S. rice or fuel ethanol (to appease American farmers) and stricter enforcement of prohibitions on transshipping Chinese goods. Since Korea already updated KORUS FTA in 2018 to address some U.S. concerns, any further concessions will be minor. The likely result: both Japan and Korea get a de facto exemption from Trump’s tariffs by summer 2025, keeping trade with the U.S. largely frictionless (outside of the existing steel/aluminum tariffs which remain). This outcome preserves critical alliances and supply chains – a scenario Washington also quietly prefers even as it publicly demands reciprocity. Thus we assign a high probability that Japan and Korea will not face long-term high U.S. tariffs; instead, expect joint statements of “resolving trade issues amicably” and strengthening cooperation.

• India – Reciprocal Understanding: Among emerging economies, India is most likely to cut a deal. By offering market openings (e.g., reducing its high tariffs on imported Harley-Davidsons, almonds, or medical devices) and aligning with U.S. strategic interests (e.g., India could impose stricter oversight on Chinese tech within India, pleasing Washington), India can secure an end to U.S. tariffs on its goods. A plausible outcome is a U.S.-India trade package announced by mid-2025: the U.S. restores some GSP benefits to India and exempts it from the 26% tariff, while India lowers tariffs on select U.S. products and maybe increases imports of American LNG and defense equipment. Both governments will hail this as strengthening the partnership. Given both sides have expressed optimism (Trump himself praised Modi’s outreach in March), this outcome is very likely. India essentially stands to avoid being a “loser” in the tariff war and could emerge a relative winner if it gains export market share from China’s exclusion.

• Vietnam and select ASEAN – Quiet Adjustments: Vietnam is also likely to get relief, though probably less public. The U.S. might quietly drop Vietnam’s tariff back to 10% if Vietnam cracks down on the Chinese transshipment issue and slightly appreciates its currency. We foresee an arrangement where Vietnam pledges to import more U.S. cotton, grains, or Boeing aircraft (to narrow the deficit) and in turn, the U.S. spares Vietnam from punitive rates. Malaysia and Thailand might follow suit on a smaller scale (e.g., Thailand could finally allow more access for U.S. pork or intellectual property reforms, winning tariff relief). These will be low-key deals, not big headlines, but effectively, many friendly ASEAN countries will not end up paying the extreme tariffs. On the other hand, countries that don’t engage – possibly Cambodia, Laos – may simply face the 10% or higher tariffs without remedy, but given their small trade volumes, they are more symbolic casualties.

• UK, Taiwan, Others – Likely Exemptions: It’s worth noting the United Kingdom, now outside the EU, has been lobbying intensely for exemption (the UK has a modest surplus with the U.S., and given the political closeness of London and Washington, it’s likely the UK will be spared via some expedited bilateral understanding). Taiwan, listed at 32%, is another special case: the U.S. likely won’t maintain a high tariff on Taiwan due to its pivotal role in tech supply chains and the political desire to support Taiwan vis-à-vis China. We predict the U.S. will quietly remove or not enforce the extra tariffs on Taiwan to bolster this ally (possibly in exchange for Taiwan buying more U.S. arms or agreeing to more U.S. pork imports, which has been a contentious issue in the past).

In summary, many countries will concede marginally – adjusting policies or agreeing to buy more American exports – allowing Trump to claim “wins” and lifting tariffs on those countries. The ones most likely to reach such understandings are U.S. allies and partners (EU, Japan, Korea, India, etc.), as well as highly trade-dependent economies that can’t afford U.S. market loss (Vietnam, etc.). These concessions, however, will often be face-saving and not fundamentally transformative. For instance, Europe will not eliminate VATs or fully open agricultural markets, but might offer enough for Trump to back down. Japan will not slash all its tariffs (which are anyway low except agriculture), but will give targeted promises. Thus, Trump will notch symbolic victories – e.g., “Country X to import $Y billion more from U.S.” – without a dramatic restructuring of those countries’ economies.

Standoffs and Resistance. On the flip side, certain actors are likely to resist Trump’s demands and weather the tariffs rather than capitulate:

• China – No Fundamental Concession: Barring an unforeseen collapse in its economy, China is highly unlikely to concede to Trump’s core demands under pressure. Beijing will not agree to dismantle its industrial subsidies, nor stop its tech aspirations, nor suddenly buy enough to erase the trade imbalance. At most, China might resume large-scale purchases of U.S. farm goods (as it did during the Phase One trade deal in 2020) if that helps diplomatically, but such purchases are now complicated by tariffs on both sides. More importantly, China sees this conflict as strategic – about containing its rise – and thus will not solve it through one-sided economic surrender. Therefore, we expect no comprehensive U.S.-China trade deal in the near term. Possibly, there could be temporary truces or partial de-escalations: for instance, if inflation in the U.S. surges, Trump might consider lowering the China tariff to ease prices, in exchange for China relaxing its counter-tariffs on some U.S. goods. But any such truce would be tenuous. Fundamentally, China seems prepared to wait out Trump’s term if needed, hoping either U.S. policy shifts after 2028 or that the U.S. business community pressures Trump to soften (American companies like Apple, reliant on China, are indeed lobbying quietly). In the meantime, trade between the two will plummet. (We discuss more in next section the formation of blocs around this impasse.)

• “Strategic Resistants” (Russia, Iran, etc.): Although not the focus of tariffs, countries like Russia and Iran – which are closely aligned with China and already facing U.S. sanctions – will not concede anything to the U.S. for tariff relief. Russia has minimal trade with the U.S. now (due to sanctions over Ukraine), and Trump’s trade war effectively bypasses them. But Russia is essentially in China’s camp, and if anything, it benefits from U.S.-China discord (e.g., selling more energy to China). Iran, similarly, trades little with the U.S. directly; it is more concerned with sanctions than tariffs. These countries matter in the bloc context: they reinforce the anti-U.S. economic bloc but have little direct negotiation with Washington on tariffs.

• Countries Unable or Unwilling to Negotiate: Some smaller or poorer countries simply lack leverage or are politically at odds with the U.S., so they will end up living with U.S. tariffs rather than altering their policies. For example, Venezuela (125% tariff on its few remaining U.S. oil shipments obviously isn’t negotiating with the U.S. given the political estrangement; those tariffs will stay (though moot due to sanctions). Nicaragua under Ortega won’t change its ways for tariff relief either. Cambodia likely will not meet U.S. conditions (it’s governed by an autocrat close to China), hence will remain sanctioned by tariffs; its garment exports will suffer until perhaps Cambodia finds other markets or the U.S. Congress intervenes (some members see punishing Cambodia’s regime as a positive side effect).

Even among larger economies, the degree of resistance vs. concession will vary by issue. Europe, for instance, will resist any U.S. push to fundamentally change its social and regulatory model (e.g., Europe will not allow hormone-treated U.S. beef or scrap its privacy laws just to please Trump). If Trump demands something too high (like zero EU tariffs and zero EU subsidies and opening agricultural fully), the EU could break off talks and retaliate. However, as noted, a middle ground likely prevents that. Mexico and Canada will resist any non-trade demands tied to tariffs that violate their sovereignty (e.g., Mexico will not accept U.S. troops on its soil to curb migration, even if threatened with tariffs). So they will push back if Trump overreaches beyond trade.

Conditions and Red Lines. The conditions under which players will concede or resist can be summarized as follows:

• Countries will concede if the cost-benefit favors concession: i.e., the U.S. market is vital to them and Trump’s ask is something they can deliver without existential harm. Example: India reducing a few tariffs (cost: minor political heat from farmers) in order to keep access to U.S. market (benefit: major, given India’s growth plans). Conversely, countries resist if Trump’s demands touch core sovereignty or economic model: e.g., asking China to abandon state capitalism, or EU to remove VAT – those will be firmly resisted regardless of tariffs.

• Domestic politics in each country set red lines. Democratic nations (EU states, Japan) have domestic constituencies – farmers, labor unions – that limit what leaders can give. Authoritarian states (China, Russia) have ideological red lines (not bowing to U.S. bullying) and internal nationalism to manage. Trump’s negotiating counterparts will concede mainly in areas where they can frame it as mutual benefit or unrelated to capitulation. For example, Europe might lower an auto tariff and claim it benefits European consumers too, rather than admit it caved to Trump.

• A notable condition is coordination among countries. If major powers coordinate their stance, they may resist more. For instance, if the EU, Japan, and others all refused to negotiate separately and presented a united front, they might force Trump to back off broad tariffs (similar to a multilateral pressure). However, such unity is hard to achieve in practice because each has different interests. It appears many prefer bilateral deals (which ironically is what Trump wants – bilateral outcomes he can tout). This fragmentation means more concessions individually, since countries can’t rely on collective action as much.

Trade Flow Forecasts (2024 vs 2025). Based on these likely deals and standoffs, we can project some trade outcomes for 2025:

• U.S.-China Trade Plummets: We forecast U.S.-China bilateral goods trade will sharply decline in 2025, potentially by 30% or more compared to 2024. In 2024, U.S. goods imports from China were around $500 billion (roughly). With 145% tariffs, a significant portion of those imports will either be sourced from elsewhere or not imported at all. U.S. exports to China (about $150 billion in 2024) will also drop due to China’s retaliation and diversion to other suppliers (Brazil for soybeans, EU for aircraft, etc.). The result could be the smallest U.S.-China trade volume in over a decade. Table 2 shows illustrative projections for major trade flows.

Table 2: Projected Change in Key Trade Flows, 2025 vs 2024 (in nominal USD, assuming current tariff policies persist most of 2025)

Trade Corridor	2024 Trade ($ bn)	2025 Projected ($ bn)	% Change (est.)
U.S. Imports from China	500	350	–30% (sharp decline due to 145% tariff)
U.S. Imports from EU	450	430	–4% (slight dip, assuming tariff removed mid-year)
U.S. Imports from Mexico	400	390	–2% (mostly stable, USMCA intact; slight dip from uncertainty)
U.S. Imports from Vietnam	110	90	–18% (initial drop, but could recover if tariff lifted late)
U.S. Exports to China	150	120	–20% (China shifts suppliers, tariffs dampen sales)
China Exports to EU	560	580	+4% (China redirects some trade to EU; EU keeps market open)
China Exports to ASEAN	350	380	+8% (greater regional integration, ASEAN not tariffing China)
EU Exports to U.S.	300	290	–3% (marginal impact, possibly even rebound if deal is struck)
Global Merchandise Trade	$22 trillion	$21.8–22.0 trillion	~ –1% to +0% (flat to slight decline; IMF warns of drag)

Sources: 2024 baseline data from UNCTAD and national trade stats; 2025 projections by author, considering tariff impacts and diversion. The 0.2% global trade loss due to U.S.-China tariffs is factored.

These projections suggest that while trade flows involving the U.S. and China will shrink, some flows between other partners may expand. For instance, China-EU trade might increase modestly, as China seeks alternative outlets for exports and the EU (not joining U.S. tariffs on China) could see cheaper Chinese goods and fill some gaps left in China by absent U.S. goods. China-ASEAN trade is likely to strengthen, given RCEP and China’s outreach – Chinese exports to ASEAN could rise, and vice versa, as the region capitalizes on supply chain reorientation. South-South trade (developing countries trading among themselves) could also rise, continuing the trend noted by UNCTAD in 2024, as developing economies rely more on each other amid great power tensions.

For the U.S., we expect increased imports from allies: with Chinese goods pricey, U.S. importers will look to countries like Mexico, India, Indonesia, and others that end up with lower tariffs. Mexico and Canada’s exports to the U.S. might even tick up if nearshoring accelerates (though our table shows a slight dip just from initial disruptions, the trend beyond 2025 could be upward). Inflationary pressures in the U.S. due to tariffs might curb volume a bit as consumers buy less of high-cost imports, contributing to overall flat global trade volume.

Winners and Losers: In the short run, no one “wins” a trade war in absolute terms – studies (e.g., Tax Foundation) have pointed out U.S. households face higher costs (an average burden of $1300 per household in 2025 due to tariffs), and global GDP takes a hit. However, relatively speaking: countries that manage to avoid tariffs and capture diverted trade can benefit at others’ expense.

• Likely “Winners”: Countries like India, Vietnam (if it gets relief), Mexico, and perhaps some EU states could gain export market share as U.S. importers shift away from China. Also, commodity exporters like Brazil and Australia might benefit from China’s increased buying (China may buy more iron ore from Australia and agricultural goods from Brazil to replace U.S. sources). Domestic industries in the U.S. that directly compete with imports could see short-term gains – e.g., U.S. steel producers benefit from 25% tariffs on steel globally (domestic steel prices rose, aiding profitability, though at the cost of downstream industries). Some U.S. farmers might gain if partners like Japan or EU agree to buy more to appease Trump (e.g., Japan might import more American corn for feed). Among developing nations, those not targeted and with capacity – such as Bangladesh (textiles) – might see an uptick as buyers seek non-tariffed sources for apparel instead of China/Vietnam.

• Likely “Losers”: China is an obvious loser in terms of lost U.S. market access (though it’s striving to mitigate it). U.S. consumers and certain import-reliant firms (like retailers, automakers sourcing parts globally) lose due to higher costs and disrupted supply chains. Smaller countries caught by tariffs without bargaining power (like Cambodia’s garment sector, African exporters of apparel or specialty goods) lose price competitiveness in the U.S. market and could see orders cancelled. Within the U.S., industries exposed to Chinese retaliation – like aerospace (Boeing jets to China), agriculture (soy, corn, pork) – lose as China’s 125% tariffs effectively shut them out (Boeing’s competitor Airbus may fill China’s orders, etc.). Global companies that rely on integrated supply chains (e.g., electronics companies that ship components back and forth across borders) also lose due to tariff costs at each border.

That said, these outcomes are not set in stone and depend on how negotiations evolve and whether any party escalates or backs down unexpectedly (for instance, if Trump abruptly lifted some tariffs to curb a stock market slump – which is not impossible – trade flows could adjust accordingly).

China’s Leverage on Third Countries. A critical element in forecasting outcomes is how China pressures other countries behind the scenes. China has indicated it will punish cooperation with the U.S. tariff strategy. We anticipate:

• Some countries will bow to Chinese pressure and refrain from overt deals with the U.S. that isolate China. For example, Pakistan (a major BRI beneficiary deeply in debt to China) is unlikely to side with the U.S. in any meaningful way – if Pakistan were even considering a deal with the U.S. to lower its 29% tariff, China could threaten to pull financing or military support, which Islamabad cannot afford. So Pakistan will probably accept U.S. tariffs and stick with China (even though Pakistan’s exports to the U.S. like textiles suffer, it may get Chinese help or increased access to Chinese markets as compensation).

• Cambodia and Laos, as mentioned, will stand with China and likely not engage with the U.S. to reduce tariffs, even if it hurts their export sectors, because their regimes depend on Chinese investment and political backing.

• African nations that are heavily tied to China (say, Zimbabwe, 18% tariff, or DR Congo, 11% tariff where China has mining interests) might be quietly warned by Beijing not to cut special deals with the U.S. at China’s expense (for instance, not to agree to exclude Chinese content from their exports to U.S. in exchange for tariff relief). If they comply with Beijing’s line, China may reward them with continued investment or debt relief; if they break ranks, China could reduce its engagement.

• European countries to watch: While the EU negotiates as a bloc, China also has influence on individual EU members through investment and the promise of market access. For example, China could caution Germany or France that if the EU-U.S. deal is too punitive to China (say the EU agrees to some alignment with U.S. restrictions on China), then China might retaliate against European firms (like by canceling Airbus orders or restricting German car sales in China). Europe will thus calibrate its concessions to U.S., mindful not to anger China too much – which ironically helps China: Europe may moderate how far it goes with Trump’s demands to avoid Chinese “countermeasures” (which China explicitly threatened if deals harm its interests. In this sense, China exerts a subtle veto on how deeply others cooperate with the U.S. strategy.

• Latin America: China has become the top trade partner for many South American countries. If, say, Brazil were to entertain joining a U.S.-led front against China’s practices, Beijing could threaten to shift soy or iron ore purchases to other countries, hitting Brazil’s economy. Lula’s Brazil is anyway inclined toward non-alignment, but Chinese influence ensures Latin America won’t rally to Trump’s cause. Indeed, some Latin states may benefit by staying neutral (as noted, getting more exports to China), reinforcing their incentive to not side with the U.S. overtly.

In essence, countries likely to “cave” to Chinese pressure are those economically dependent on China or politically aligned with it, and who do not see sufficient benefit in antagonizing China just to get a slightly better deal with the U.S. The U.S. tariffs, though painful, might be considered the lesser evil compared to losing China’s favor. Conversely, countries less exposed to China (like Mexico, whose economy is U.S.-oriented) feel freer to align with the U.S.

China’s pressure could take forms beyond trade: for example, it could withhold diplomatic support (like vetoing initiatives in the UN that a country cares about) or increase its support to that country’s rivals. This holistic influence means even nations not in direct trade war crosshairs must weigh China’s reaction. The net effect likely preserves a sizeable group of nations that won’t join a U.S. economic bloc wholeheartedly.

Final Negotiation Outcomes: Taking all these dynamics together, by the end of 2025 we expect the following likely scenario:

• The U.S. will have bilateral understandings with the EU, Japan, Korea, UK, and a number of others, effectively exempting them from the harshest tariffs. The 10% base tariff might remain broadly in place on most countries (Trump may insist on keeping that symbolic tariff on all imports to claim victory on reciprocity), but many allies could be exempted from additional tariffs beyond that.

• China and the U.S. will remain at an impasse, with high tariffs on both sides still in effect and no comprehensive deal – perhaps only piecemeal truces (e.g., an agreement to allow certain critical supplies like rare earths or medical goods to flow unimpeded in exchange for something).

• Some emerging market “swing states” like India and Vietnam will secure enough relief to stay engaged with both the U.S. and China. They might become production hubs that partially replace China for U.S. importers, while still trading with China (India-China trade might even grow as China seeks India’s raw materials, etc., though political tensions between those two are a limiting factor).

• Global trade growth will be subdued, but a full collapse avoided by these mitigating deals. The world will adjust to a new pattern of bilaterally managed trade rather than multilateral free trade. Tariffs will be used as negotiation chips rather than long-term revenue tools (with the exception of U.S.-China where they might become semi-permanent until geopolitical tensions ease).

We must note a wildcard: domestic U.S. politics or economic pain could yet change Trump’s approach. If U.S. inflation or a stock market downturn is attributed to the tariffs, Trump might declare some form of victory and scale back certain tariffs unilaterally to stabilize the economy (especially entering 2026 election season for Congress). Already, global markets have “tumbled in the wake of Trump’s latest tariffs” and investors fear long-term damage. This pressure might impose a ceiling on how far the confrontation goes. Our forecasts assume the current trajectory continues with only those deals mentioned moderating it. A full-scale trade war beyond what’s happened (e.g., involving services or currencies) is not yet triggered, and hopefully will be averted by the ongoing talks.

In conclusion, we foresee a world where many will bend but few will break in the face of Trump’s tariffs: enough concessions will occur to partially restore trade flow equilibrium, but the fundamental U.S.-China rift will persist, and a number of countries will align according to their strategic leanings, thereby reshaping global trade networks in the process.

Beyond Tariffs: A New Global Economic Order?

The tariff skirmishes of 2025 are more than just isolated trade disputes – they appear to be symptoms of a deeper geopolitical realignment. As the dust begins to settle, the world may be entering an era where economic blocs harden and a “new Cold War” looms on the horizon, defined not by ideological dichotomy of communism vs capitalism, but by a rivalry between two systems of economic power: one led by the United States and one led by China. In this section, we explore how the current confrontations could lead to a broader global reset – in trade, technology, and finance – and assess evidence for the emergence of competing blocs akin to a bifurcated world order.

Formation of Competing Blocs.  President Trump’s aggressive stance has in some ways accelerated the formation of two camps:

• On one side, the United States and its traditional allies (Western Europe, Canada, Japan, South Korea, Australia, etc.) are coalescing, at least in recognition of a common interest to maintain a U.S.-led system (albeit with reforms). Trump’s tactics have been divisive, but ironically, facing pressure, many allies have reaffirmed their security ties with the U.S. (for example, Japan and Europe doubling down on NATO and Indo-Pacific partnerships). The negotiations to exempt allies from tariffs can also be seen as the U.S. effectively drawing those countries closer into its economic orbit – offering them preferential terms while outsiders (read: China and those aligned with it) are penalized. This starts to resemble an economic alliance structure. A telling quote from a commentator described Trump’s approach as an attempt to create an “economic NATO, encircling China diplomatically and commercially”. Under this lens, the tariff pause for others while isolating China is a strategy to consolidate a U.S.-centric trade bloc.

• On the other side, China is anchoring a grouping of states that either align with its economic model or benefit from its rise. This includes Russia (which is now heavily reliant on China due to Western sanctions), Iran and others antagonistic to the West, and a swath of developing nations in Asia, Africa, and Latin America that receive substantial Chinese investment. China’s outreach to the EU and Asia suggests it is trying to prevent the opposite camp from being too unified, but if the transatlantic partners stick with the U.S., China will put more emphasis on forums like BRICS (Brazil, Russia, India, China, South Africa) and the Shanghai Cooperation Organization. It is notable that China’s ties with developing regions are strengthening – e.g., China’s trade with Africa and Latin America has been growing and might intensify if Western markets falter. Additionally, China’s championing of multilateralism in opposition to U.S. unilateral tariffs plays well globally; it portrays itself as the guardian of the WTO and free trade, winning sympathy in parts of the world.

The emerging picture is not a perfect dichotomy – many countries, like those in ASEAN or India, will try to stay non-aligned or in both camps. However, trade, tech, and capital flows are already showing signs of fragmentation along geopolitical lines. Recent IMF research (2024) on trade fragmentation finds that global trade and investment patterns are increasingly clustering into U.S.-centric and China-centric networks. The trade war and related sanctions have caused firms to rethink supply chains, often favoring locations within friendly countries (“friend-shoring”). For instance, an American company might prefer to invest in Mexico or Vietnam (U.S.-friendly) rather than in China; a Chinese tech firm might avoid U.S. suppliers and source from domestic or Russian suppliers, etc.

Trade and Economic Alignments Data: To illustrate bloc formation, consider global alignments in trade agreements and partnerships as of 2025 (Table 3).

Table 3: Emerging Economic Blocs and Alignments (2025)

Bloc / Alignment	Key Members	Share of Global GDP	Trade Characteristics
U.S.-Led Bloc (loosely defined)	USA, Canada, Mexico, EU (most members), UK, Japan, South Korea, Australia, Taiwan, others	~60% (estimate)	High intra-bloc trade, common standards (e.g., USMCA, trans-Atlantic ties). Coordinating on tech restrictions against China.
China-Led Bloc (loose)	China, Russia, Iran, Pakistan, North Korea, parts of ASEAN (Cambodia, Laos, Myanmar), some Africa (Zimbabwe, etc.)	~25% (estimate)	Trade via Belt & Road, currency swap agreements, reliance on Chinese infrastructure. High barriers with U.S.-led bloc.
Non-Aligned / Swing	India, Brazil, South Africa, ASEAN (majority), Gulf States (KSA, UAE), Turkey, others	~15%	Mix of ties: engage economically with both blocs. Aim to maximize gain by not fully committing to either side.

Note: GDP shares are rough and overlapping (EU counted separately from US for bloc calc). The U.S.-led group, if fully consolidated, represents well over half of world GDP and a plurality of military power. The China-led grouping is smaller economically but includes the world’s second-largest economy and key resources. Non-aligned is diverse but significant portion of population and production.

This table is simplified; reality is fluid. But we can see trends: The U.S.-led coalition includes nearly all advanced democracies and many developing allies; collectively, they still dominate the global financial system and advanced technology sectors. The China-led coalition contains huge populations and critical natural resources (Russia’s energy, Africa’s minerals, etc.), and it’s working on its own institutions (Asian Infrastructure Investment Bank, BRICS Bank) to reduce reliance on Western-led systems. The Swing group (India, etc.) will determine a lot – their choices could tip balances (for instance, if India firmly joins the U.S. camp, that’s a big boost to the U.S. bloc; if it drifts toward China, that strengthens China’s side immensely).

Is a New Cold War Underway?  Many analysts now indeed speak of a “Second Cold War” or “New Cold War” dynamic between the U.S. and China. Key features reminiscent of the Cold War are emerging:

• Trade Bifurcation: As noted, trade patterns are splitting. The U.S. is curbing trade with China (and encouraging partners to do likewise), while China is building alternatives. This echoes the Cold War when the Western bloc traded within itself and Comecon countries traded within their sphere, with minimal cross-bloc commerce. It’s not absolute yet (China still trades a lot with Europe and U.S. firms still operate in China), but the trajectory is toward partial decoupling. Already by early 2025, we saw a significant reduction in U.S.-China tech trade (due to export controls on chips and imports bans on certain Chinese tech). The tariff war extends this decoupling to more sectors.

• Technology Spheres: A technological bifurcation is accelerating. The U.S. has banned Huawei and other Chinese tech from its networks and is rallying allies to adopt Western 5G and semiconductor standards. China, in turn, is pushing for self-sufficiency in semiconductors and promoting its BeiDou satellite system as alternative to GPS, etc. We are likely headed to two tech ecosystems: one using U.S. or allied providers, one using Chinese (and perhaps Russian) providers. For instance, internet governance and data flows might split – with China’s more censored, state-controlled model influencing many countries, and the open internet model in others. If trade blocs form, tech and data will follow bloc lines for security reasons.

• Financial Segmentation: The U.S. still holds the trump card of the dollar-centric financial system. However, China and Russia (and others) are actively trying to bypass it, motivated further by sanctions. The use of local currencies in trade is rising among BRICS. China has been signing bilateral currency swap agreements and launching the digital yuan. There is chatter about a BRICS reserve currency or greater reliance on the Euro for some trade to avoid dollars. Should the world split into blocs, we could see more dual financial systems: one anchored on the dollar (and euros, yen – essentially Western banks), and another using yuan, gold, or other means for settlements within the China-led bloc. Already, after Russia was cut off from SWIFT in 2022, Russia and China began using China’s CIPS (Cross-Border Interbank Payment System) more. While the dollar remains dominant, if trust erodes, the fragmentation may intensify – part of the “reset” could be the global monetary order evolving from one big network to a couple of interlinked but separate networks.

• Institutional Rivalry: During the Cold War, we had parallel institutions (e.g., NATO vs Warsaw Pact, IMF/World Bank vs nonequivalent communist structures). Now, we see the WTO and Bretton Woods institutions under strain. The U.S., ironically under Trump, has weakened WTO by ignoring it; China despite rhetoric also often acts outside it (Belt & Road deals are bilateral and sometimes non-transparent, bypassing multilateral norms). If the WTO cannot function, we might end up with plurilateral trade pacts within blocs – e.g., a revamp of TPP (now CPTPP) for U.S. and allies, and RCEP for China and its circle, with limited overlap. Similarly in finance: if Western sanctions and Chinese counter-sanctions proliferate, each side might standardize rules internally but not with the other.

• Security Alliances overlapping Economics: The new blocs are heavily influenced by security relationships. The U.S. is leveraging NATO, AUKUS (with UK, Australia), the Quad (with India, Japan, Australia) – these are security groups but increasingly have economic components (like technology sharing, supply chain coordination for defense-related goods). China and Russia coordinate diplomatically and in military exercises, and those ties spill into economic support (Russia leaning on China for trade, China getting discounted Russian oil, etc.). Many countries might feel compelled to align economically with the side that provides their security. For example, if the U.S. promises to defend Philippines in the South China Sea, the Philippines might lean to U.S. economically despite Chinese trade allure. Conversely, countries under Chinese security influence (like Cambodia) align economically with China. This mirror-imaging of security and economic blocs is very much a Cold War-like phenomenon.

However, it’s crucial to note differences: the Cold War was far more binary and rigid; today’s globalization means even opposing blocs are entangled (China still in WTO, Americans still invest in China, etc.). The question is how far the decoupling goes. So far, what we’re witnessing is a partial decoupling or a “selective Cold War” – primarily in strategic sectors (tech, defense, some finance). The broad consumer economy is still partially integrated, though Trump’s tariffs push more separation even there.

Global Economic and Political Reset: What is the broader reset likely to look like once tariff conflicts stabilize?

1. End of Hyper-Globalization: The era of ever-freer trade (1990s-2010s) is giving way to an era of managed trade and regionalization. Companies will restructure supply chains to be more regional (North America, Europe, or Asia-based) to avoid geopolitical risks. Governments will emphasize economic security – ensuring key industries (semiconductors, energy, medical supplies) are produced domestically or in allied countries. This reset means efficiency is slightly sacrificed for resilience and loyalty. The notion of comparative advantage is now filtered through a security lens (“comparative advantage among friends,” as it were).

2. Revamped Alliances and New Deals: We might see new trade agreements within blocs. For example, the U.S. may pursue a “Technology and Trade Partnership” with allies – not a full free trade deal, but agreements on standards and tariff-free exchange of critical goods among trusted partners. Something like a revived TPP but limited to allies might come back (perhaps including UK, Taiwan, etc., and explicitly excluding China). Meanwhile, China will deepen RCEP and maybe expand the Belt & Road into a more formal trading bloc (maybe inviting willing partners into some sort of “BRI trade network” with preferential tariffs among them).

Already, global economic alignments are shifting: consider that China is courting the EU to prevent full alignment with the U.S., while also wooing developing giants like Brazil. The result might be multipolar blocks rather than a neat binary: e.g., a U.S.-led coalition, a China-led coalition, and a non-aligned group that plays both sides. However, if pressure mounts, the non-aligned may shrink as choices become unavoidable – akin to how neutrals in Cold War eventually leaned one way or another in many cases.

3. Multilateral institutions under stress: The WTO’s relevance is diminishing as countries resort to unilateral tariffs and bilateral fixes, as we see now. If this continues, global trade rules might fragment. Possibly, some countries could form a breakaway system – for instance, China and allies might form their own dispute resolution arrangements, since the U.S. is ignoring WTO rulings, etc. We might also see the IMF and World Bank facing competition from China’s own financing initiatives. This institutional divergence would solidify the blocs.

4. Risk of conflict and need for détente: A worrying aspect of a new Cold War is the potential for real conflict (military or cyber). The trade war could spill into a currency war (countries devaluing to offset tariffs) or a tech war (already happening with chip bans). If uncontained, incidents could escalate (e.g., conflict over Taiwan could intertwine with trade blocs – an extreme but possible crisis). On the flip side, just as the original Cold War eventually led to arms control and détente, this economic Cold War might force new global agreements once both sides realize the damage. Perhaps by 2026–2027, if global growth suffers enough, major powers could convene something akin to a Bretton Woods II or Plaza Accord for trade – hammering out new rules on subsidies or digital trade in a grand bargain to avoid a complete fracture.

However, given as of April 2025, positions are entrenched, the immediate trajectory is further toward competition than cooperation.

A “Broader Reset”: In plain terms, the confrontations of 2025 are prompting each nation to re-evaluate its economic alliances, dependencies, and strategies. Countries are asking: Who can we trust for critical supplies? Who will have our back in a crisis? The answers to those questions are re-drawing trade patterns. The concept of trade as purely driven by market logic is being replaced by trade as a tool of power. This is a paradigm shift – a reset of the globalization paradigm.

For some countries, this reset means choosing sides; for others, it means investing heavily in self-sufficiency (e.g., China’s dual circulation strategy, or the U.S. bringing chip manufacturing home under the CHIPS Act). It also means forums like the G20 become arenas of U.S.-China rivalry rather than consensus builders.

We should note that not everyone sees this bifurcation as inevitable. There are voices calling for a renewed globalization minus the frictions – for example, some European leaders talk of “de-risking” rather than decoupling from China, meaning they want to keep trade open but just mitigate specific risks. It is possible that after the heat of this tariff war, cooler heads push for partial reintegration (perhaps a U.S.-China modus vivendi on trade if not friendship, in a few years).

But as of now, the trend is toward a world where economic relations are increasingly determined by geopolitical alignments. The IMF’s chief economist stated, “we’re entering a new era as the global economic system that has operated for the last 80 years is being reset.”. This captures the moment: the post-WWII system (U.S.-led liberal order, with China integrated after 2001 WTO entry) is breaking apart. What replaces it might resemble a bipolar or multipolar order where large blocs trade more within themselves and less with the rival bloc, and where global growth is slower as efficiency is traded for security.

Conclusion Thoughts:So, are we in a new Cold War? In many respects, yes, a new cold war–like rivalry is unfolding, with trade and tech as the battlegrounds instead of proxy wars. The tariff battles are one front of that rivalry. If the world fully enters this Cold War II, we may see a lasting division: one part of the world using Chinese 6G networks and digital currencies and trading in yuan, and another part using Western tech and dollars – with limited interaction between. It hasn’t gone that far yet, and there remains an interdependence (e.g., China still depends on Western semiconductor equipment, the West on Chinese rare earths). The coming years will test whether that interdependence can hold the world together or whether strategic decoupling will override it.

Once the immediate tariff confrontation stabilizes (through the various deals and stalemates discussed), the “reset” likely solidifies: the U.S. and China will both have rearranged their trade relations around trusted partners, and the global trading system will be more compartmentalized. The final section of the article (Conclusion) will reflect on the implications of this trajectory – whether it ultimately yields a stable balance or perpetual tensions.

Conclusion

Three months into Donald Trump’s second term, the global trade landscape is undergoing a momentous transformation. The tariff salvos fired by Washington – met with return fire from Beijing and frantic maneuvers by others – have laid bare a world in flux. We have analyzed the specifics of Trump’s tariff regime as of April 2025, cataloguing its unprecedented breadth: a 10% blanket duty on all imports and a maze of “reciprocal” surcharges hitting friends and foes alike. We have seen how major economies responded – with negotiation in Europe and Japan, retaliation in China and Canada, cautious acquiescence in India and others. From this, we projected likely outcomes: a series of bilateral deals that dial back some tariffs, but a persisting U.S.-China impasse that effectively decouples the world’s two largest economies. Indeed, current data already show U.S.-China trade collapsing and global growth downgrades, with the IMF warning of significant slowdown and instability due to the trade war.

Beyond the immediate economics, our analysis indicates that Trump’s tariffs have become a catalyst for a larger geopolitical and economic “reset.” Countries are realigning – sometimes uneasily – into spheres of influence driven by strategic considerations. The contours of a new Cold War-like divide are emerging: a U.S.-anchored bloc of democracies and close partners on one side, and a China-centric bloc of state-directed economies and aligned nations on the other. Many nations are being pressed to choose sides, while others strive to remain non-aligned and extract gains where they can. This polarization is evidenced by defensive economic policies: supply chains are being re-routed around allies, technology ecosystems split, and alternative financial systems explored, all in response to the fracturing of trust between the great powers.

What does this portend for the future of global trade? Several high-probability scenarios stand out:

• The multilateral free trade order that governed the late 20th century will continue to erode. We may not see a full return to 1930s-style protectionism everywhere, but trade will be increasingly managed through power politics. Tariffs and export controls are now routine tools of diplomacy, not mere bargaining chips at WTO rounds. The WTO itself has been sidelined in this tariff exchange – an omen that its relevance may fade unless reforms occur.

• Bilateral and regional pacts will fill the void. We will likely witness new agreements among groups of like-minded countries to facilitate trade within their circles (for instance, a deepened CPTPP in the Pacific without China, or an EU-US industrial goods accord). Conversely, trade across blocs (e.g., U.S.-China, or potentially EU-China if relations sour) will face higher barriers and continued friction. The world economy might thus organize into a few major trading spheres with high integration internally but thinner connections between them.

• Global trade growth is poised to be slower and more volatile in this environment. Efficiency losses from shifting suppliers, duplicative supply chains, and reduced economies of scale act as a drag on growth. The IMF’s downgrade of global growth to 2.8% for 2025, and an estimated 0.2% hit to global trade volume from the U.S.-China tariff clash alone, are early signs. While not catastrophic, this represents a substantial departure from the robust trade expansion of the past decades that lifted many economies. Developing countries, in particular, could find it harder to export their way to prosperity if major markets are bifurcated and preoccupied with self-sufficiency.

• Strategic dependencies will be the fault lines of future disputes. As we move forward, areas like semiconductors, rare earth minerals, artificial intelligence, green energy technology, and pharmaceuticals will be tightly guarded. Nations will jockey to secure these supply chains within friendly territory. Any country seen as aiding the rival camp in these sectors might face swift retribution (tariffs, sanctions, or otherwise). This also means countries blessed with critical resources (e.g., rare earths in Africa, lithium in Latin America) might face intense courting – or coercion – from both sides.

However, it is important to emphasize that a new Cold War is not predetermined to last forever. History teaches that protracted conflicts often spur counter-movements toward peace once costs mount. If the current tariff battles push the global economy to the brink of recession, we could see a public backlash against decoupling and pressure on leaders to compromise. There are already domestic constituencies in the U.S. and China that favor stabilization: American farmers and retailers hurting from lost markets, Chinese manufacturers losing income and jobs. Global financial markets, too, react negatively to escalation, as seen in stock downturns after each tariff announcement. Such forces could eventually compel a rethink. Perhaps the 90-day pauses and ongoing talks are the first signs that even the architects of this confrontation recognize a need to manage it prudently.

In the post-tariff confrontation reset, we foresee a few potential positive developments: a drive for new rules of the game – maybe a plurilateral pact on digital trade or fair competition that both Washington and Beijing can agree to, which could serve as a foundation to rebuild trust gradually. It may also catalyze innovation in those economies as they can no longer rely on global supply lines; for example, the U.S. and EU investing in domestic chip fabs, and China accelerating breakthroughs in indigenous technology. If handled cooperatively down the line, these parallel innovations might even complement each other in a future detente.

Nonetheless, the near-term outlook is one of caution and guarded optimism at best. The world is undeniably entering a more fragmented state, and policies in the coming months will determine if fragmentation hardens or if a new equilibrium can be negotiated. Our analysis points to a high likelihood that by the end of 2025, we will see a partial stabilization: some tariffs rolled back due to bilateral deals, global markets adjusting to new supply routes, and growth picking up modestly from the initial shock as businesses adjust. Yet, underneath that surface stability will be a fundamentally altered global trading system – one that is more regional, more politicized, and more uncertain.

For policymakers and businesses, the imperative is to adapt to this new reality. Diversifying supply chains, building flexibility into operations, and engaging in collective efforts to set fair rules will be key. Internationally, middle powers (Europe, Japan, India, etc.) have a role in preventing the two superpowers’ rift from tearing apart the entire system – through diplomacy and by upholding core principles of an open economy where possible. Whether the final outcome is a managed rivalry or a full-scale schism will depend on actions taken now, in the aftermath of Trump’s tariff shock.

In conclusion, the events of early 2025 may well be remembered as the inflection point when global trade was irrevocably changed. President Trump’s tariff policies have, intentionally or not, hastened the demise of old assumptions and thrust the world into a new paradigm. We stand at a crossroads: one path leads to entrenched blocs and zero-sum competition, another to a reimagined framework for coexistence. Navigating this juncture requires sober analysis (as we have attempted here) and a willingness by world leaders to balance firmness with foresight. The stakes – for economic prosperity and global peace – could not be higher. The coming “reset” will test the resilience of the international system, and its outcome will shape the course of global trade for decades to come.

References:

(Tariffs in the second Trump administration - Wikipedia)

(China warns against any agreements that harm its interests : NPR)

(U.S.-China Tariff War: A Global Reckoning | by Riaz Laghari | Apr, 2025 | Medium)

(Amid trade war with China, Trump lists 8 non-tariff ways countries are 'cheating' US – Firstpost)

(Global trade hits record $33 trillion in 2024, driven by services and developing economies | UN Trade and Development (UNCTAD)