Trump's Tariffs One Year On: A Shifting Global Economic Landscape

A year has passed since former US President Donald Trump launched his trade war, aiming to revitalise manufacturing, generate government revenue, and unlock new markets. Today, US tariff rates average around 10%, a substantial increase from approximately 2.5% at the start of last year.

US-China Decoupling Accelerates

Trump’s April 2025 tariff imposition, particularly on Chinese goods, led to a retaliatory trade escalation. Despite a subsequent calming of tensions, Chinese goods faced duties 20% higher by the end of last year. This resulted in a significant downturn in direct trade between the two economic giants, with US imports from China plummeting by roughly 30% and US exports to China seeing a similar drop of over 25%. Consequently, Chinese goods now represent less than 10% of America's total imports, a level not seen since 2000. Davin Chor, a professor at Dartmouth University’s Tuck School of Business, notes that this marks a decisive decoupling, suggesting that pre-existing company strategies have been accelerated, indicating a lasting shift.

Global Trade Re-wiring

Beyond China, Trump’s broader tariff measures included increased levies on items such as steel and timber, alongside the removal of exemptions for low-value shipments. Despite these new taxes, overall US imports grew by over 4% last year. However, these measures prompted many international firms to seek alternative markets, leading to a significant ‘re-wiring’ of global trade routes. Even for countries like the UK, which faced a more limited 10% tariff, America's share of exports declined, while European nations like Germany, France, and Poland gained ground, according to economics professor Jun Du of Alston University.

Strain on Alliances and Soft Power

While the US successfully negotiated some trade adjustments with certain countries to benefit American businesses, Trump's approach has also alienated allies. For instance, Canada, despite largely being exempted from tariffs, recently agreed to drastically cut tariffs on Chinese-made electric vehicles, a move that diverts from US interests. Petros Mavroidis, a professor at Columbia Law School, highlights that the core concern is not merely the level of tariffs but the unilateralism, which has eroded US soft power and complicated international cooperation on various fronts, from geopolitical issues to digital trade agreements.

Limited Domestic Economic Impact and Future Outlook

Domestically, the initial promise of a manufacturing boom did not materialise, with the sector largely in contraction last year. Foreign investment into the US also declined. Furthermore, a Supreme Court ruling in February effectively struck down the Liberation Day duties, obliging the US to refund over half of the £260 billion collected in tariff revenue. Goldman Sachs estimated that approximately 55% of the new charges were passed on to consumers, contributing to a half-percentage point increase in the US inflation rate. However, despite these strains on businesses and consumers, the US economy still grew by 2.1%, and unemployment remained low at 4.4%. While the White House plans to reinstate similar policies through other legislative means, the long-term impact of such protectionist tendencies and the risk of retaliatory measures from other nations remain significant concerns, as noted by economist Michael Pearce of Oxford Economics.