Trump’s Tariffs: How Will Global Trade Adapt in 2025?

U.S. President Donald Trump’s ‘Liberation Day’ tariffs have injected considerable uncertainty among trade partners. The result is likely to be a drop in global trade in 2025—potentially a significant reduction—but companies worldwide must continue to manage inbound and outbound supply chains in this turbulent environment. Below, we offer some preliminary perspectives. The world is watching.

Highlights:

The U.S. has imposed a 10% baseline tax on all imports and elevated ‘reciprocal’ tariff rates on dozens of countries.
After several rounds of retaliatory tariff hikes between the U.S. and China, Chinese imports to the U.S. are now subject to tariffs of 125%.
Tariffs are a conventional tool used in international trade policy to protect domestic industries, but Trump’s coordinated tariffs are perceived as extreme unilateral measures.
The array of new tariffs will likely have far-reaching effects on global trade and supply chains in 2025, making it imperative for companies to take concerted action now.

On 2 April, a day U.S. President Donald Trump called “Liberation Day,” the U.S. imposed a 10% baseline tax on all imports as well as elevated reciprocal tariff rates on dozens of countries with trade surpluses with the U.S.

The new tariffs, which aim to raise government revenue and bring factory jobs back to the U.S., elevate U.S. import duties to nearly the same level as the early 1930s during the Great Depression, according to one estimate.

The “Liberation Day” tariffs are in addition to recent announcements of 25% duties on imports from Canada and Mexico and 10% on all Chinese imports. Canadian and Mexican imports are not subject to the latest reciprocal tariffs as the 25% duties remain in place, along with 10% for Canadian energy imports.

China, which had the largest trade surplus with the U.S. (USD 319 billion) in 2024, was allocated a 34% reciprocal tariff rate, meaning that Chinese imports were subject to 54% tariffs.

On 8 April, after China imposed 34% retaliatory tariffs on U.S. goods, President Trump added an additional 50% duties on imports from China, meaning that Chinese goods were subject to a tariff rate of 104%. On 9 April, shortly after Trump’s tariffs went into effect, China again raised tariffs on U.S. imports from 34% to 84%. This, in turn, drew a response from Trump later that same day when he announced that tariffs on Chinese goods would be raised to 125%. Trump also announced a 90-day pause on tariffs for dozens of countries—but not China.

As part of the “Liberation Day” tariffs, countries with the largest trade surpluses with the U.S. were allocated elevated new tariff rates (in addition to the 10% baseline duty on all U.S. imports). In 2024, the U.S. had trade deficits with 103 out of 218 import partners.

The following countries received the highest reciprocal tariff rates, all above 20%:

China (trade surplus with the U.S. of USD 319 billion): 125% U.S. tariff rate (as announced on 9 April)
Vietnam (USD 129 billion): 46%
Thailand (USD 48 billion): 36%
Taiwan, China (USD 76 billion): 32%
Indonesia (USD 19 billion): 32%
Switzerland (USD 39 billion): 31%
South Africa (USD 9 billion): 30%
India (USD 49 billion): 26%
South Korea (USD 70 billion): 25%
Japan (USD 72 billion): 24%
Malaysia (USD 26 billion): 24%

How Will Global Trade Adapt in 2025?

Tariffs are a conventional tool used in international trade policy to protect domestic industries and generate government revenue. Developing countries generally impose higher import tariffs than developed countries to preserve fledgling local industries against imports by well-established foreign companies. Developing countries also often face higher export tariffs, particularly in agriculture and labour-intensive manufacturing sectors.

Agricultural exports, especially from developing countries, are subject to some of the highest tariffs in international trade. Some manufactured goods, like textiles and apparel, are also subject to high tariff rates, while raw materials generally face the lowest tariff rates.

Trump’s “Liberation Day” tariff hikes are not conventional. The coordinated general 10% tariff and high reciprocal tariffs are perceived to be extreme unilateral measures. The new U.S. tariffs are also perceived to deviate from trade agreements like the U.S.-Mexico-Canada Agreement (USMCA) and the World Trade Organization (WTO). At a stroke, the latest U.S. tariff regime elevated the risks for a debilitating global trade war in 2025, disrupted supply chains and reduced international trade flows.

The most immediate effect of the “Liberation Day” tariffs will likely be extended trade negotiations between the U.S. and other countries. Some countries and regions have taken immediate countermeasures and imposed tariffs on U.S. imports, notably Canada (U.S. agricultural products, steel and aluminium), China (U.S. agricultural and food products, as well as export controls on critical minerals to the U.S.) and the EU (a range of U.S. goods). Several other countries, including Japan, Vietnam, South Korea and India, did not impose retaliatory tariffs but called for negotiations to reach a settlement with the U.S.

Trump’s sweeping tariffs will make foreign goods more expensive in the U.S. and might benefit specific local industries while boosting employment over the short term. However, the long-term effects of tariffs are questionable due to underlying trends in the global economy. The U.S. trade deficit may not decrease significantly if consumers have to pay more for domestically produced goods and imports. Tariffs alone will not address the automation and offshoring trends that often drive job losses.

With the U.S. as the world’s largest importer and second-largest exporter, Trump’s tariffs could have far-reaching effects on global trade as countries adapt and respond to U.S. trade policy.

Trends and Developments We May See in 2025:

Disruptions and diversification of global supply chains: Tariffs will increase the cost of trade, and erecting trade barriers will inevitably cause delays. Companies will restructure and realign supply chains to reduce exposure to U.S. tariffs and increase localisation in non- or lesser-tariffed countries.
Prolonged trade wars and retaliatory tariffs: Canada, Mexico and China, the three largest purchasers of U.S. goods, have all indicated their intention to introduce retaliatory tariffs, and the U.S. has been locked in an adversarial economic relationship with China since the start of Trump’s first term in 2018. Such trade wars and disputes cause uncertainty and volatility in the global economy.
Risk of high inflation: Tariffs lead to higher prices, which producers will inevitably pass on to consumers, leading to broader inflationary pressures.
Decreased economic growth: Tariffs increase the cost of trade, reduce consumption and negatively affect investment, leading to lower economic growth. Tariffs will not cause a global recession alone but could be a decisive contributing factor.
Increasing regional trade: Countries within regional trading blocs such as the Association of Southeast Asian Nations (ASEAN), the African Continental Free Trade Area (AfCFTA) and the Regional Comprehensive Economic Partnership (RCEP) are subject to reduced tariffs. Hence, U.S. tariffs will incentivise more regional trade within trading blocs.
Self-inflicted ‘black swan event’: In an extreme scenario, tariffs and a combination of other factors could create an unexpected, high-impact disruption of immense consequence in the U.S., e.g., collapse of financial markets, mass layoffs and recession, creation of international trade blocs that bypass and exclude the U.S. and political crisis and social unrest.

What is certain is that Trump’s tariffs inject uncertainty into global trade patterns, which could become more complex, fragmented and regionalised in 2025. The result will likely be a drop in global trade, potentially a significant reduction. Amid this uncertainty, companies must adapt and continue to manage inbound and outbound supply chains.

Perspectives on Managing Risk and Uncertainty in a Turbulent Environment:

Establish a strategic intelligence ‘control tower’ within the organisation: Establish a task team to manage processes and systems. Dedicate staff within the task team to track, monitor and feed information to catalyse critical intelligence throughout the organisation.
Prioritise strategic intelligence: Monitor tariff updates daily via trusted sources and legal advisors. Regularly conduct compliance reviews and always be prepared for audits and retaliatory trade measures.
Conduct exhaustive scenario planning: Review all potential supply chain scenarios over the short, medium and long term and carefully manage the interplay between short-term pivots and long-term strategic repositioning.
Produce coherent and timely contingency plans: Map exposure to tariffed goods with financial stress tests for all trade war scenarios. Review alternative supply and export markets with the goal of diversification. If necessary, redesign products to use components from tariff-free regions.
Ensure resilient inventory and contacts: Maintain buffer inventory for critical goods and negotiate flexible contracts.
Review and realign strategic priorities: Is a global strategy still viable, or would it be better to regionalise? Update ESG frameworks to align with tariff policies.

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