The global economy has been reeling from the impact of former US President Donald Trump’s aggressive tariff policies, which created significant volatility in trade relations worldwide. While the global market was once characterized by relatively predictable trade flows, the uncertainty and instability introduced by Trump’s tariff crusade have disrupted the smooth functioning of international trade.
Recently, there have been signs of a potential softening of the US stance on tariffs, with Trump signaling that deals could be in the works with countries like India, Japan, and South Korea, while China reviews new proposals from Washington. However, experts caution that the worst may not yet be over. Despite Trump's suggestions that resolution may be near, many companies and businesses, large and small, are still feeling the heat from unpredictable tariff hikes.
In the past week, major corporations such as Electrolux, Volvo Cars, and Diageo have downgraded their sales targets or delayed their business plans due to the turbulent tariff environment. Smaller businesses, particularly those heavily reliant on cross-border trade, are also facing collapse. As Cindy Allen, CEO of Trade Force Multiplier, put it, “Going from zero to 145% tariffs is simply unsustainable for most firms,” noting that many small and mid-sized businesses are exiting the market.
Despite optimism from certain parties that deals are near completion, the uncertainty surrounding tariff policies continues to drag on the global economy. Economists are warning that any resolution may take longer than expected, and potentially come at a greater cost than initially anticipated. Isabelle Mateos y Lago, Chief Economist at BNP Paribas, described the US tariff policy as a “serious negative shock” for the world economy in the near term, and warned that the ultimate outcome could be harsher than predicted.
The toll of these tariffs is already visible in global data: China’s manufacturing activity shrank at its fastest pace in over a year in April, while the UK is seeing a sharp drop in export orders — the steepest decline in almost five years. Even Germany, which had seen strong performance from its factories, may have simply rushed shipments ahead of looming tariffs, creating short-term gains that could lead to a future slump. Countries like Japan, the Netherlands, and several in the Middle East and North Africa have downgraded their growth forecasts, as the uncertainty continues to undermine business confidence.
However, not all regions are suffering equally. India seems to be benefiting from the global tariff turmoil, as it faces lower tariffs than China. The shifting of US tech giant Apple’s supply chain to India and the country’s manufacturing sector reaching a 10-month high have positioned India as an emerging supplier of choice. Shilan Shah, economist at Capital Economics, noted, “India is well positioned to be an alternative to China,” suggesting that India’s ability to capitalize on the ongoing US-China tariff tensions could offer significant opportunities.
Despite the uncertainty, there are silver linings. The higher tariffs on imported goods into the US have led to pricier imports, which could dampen demand globally. However, this also reduces inflationary pressures, potentially giving central banks more room to cut interest rates and stimulate their economies. The Bank of England is expected to cut rates in response to the economic slowdowns caused by the tariff wars.
The big questions remain: Will Trump’s tough strategy encourage China to stimulate domestic demand? Will Europe take concrete steps to remove internal trade barriers? The answers to these questions could define the shape of the global economy in a post-tariff world.
For now, the global economy remains in a holding pattern, caught between hope for a resolution and the ongoing challenges brought on by tariff-related uncertainty. While the tone may be softening, the tariff era is far from over.
