One year after US President Donald Trump initiated his trade war, promising a new era for American manufacturing and revenue generation, the landscape of global commerce has undergone profound shifts. US tariff rates now stand at their highest in decades, with the average effective rate climbing to approximately 10% from about 2.5% at the start of last year. This aggressive protectionist stance has triggered a complex re-evaluation of international trade relationships, impacting everything from supply chains to consumer prices.
US-China Break-up Accelerates
Last April, President Trump’s ‘Liberation Day’ announcement introduced a minimum 10% tariff on many foreign goods, with significantly higher duties targeting countries like China. The subsequent tit-for-tat exchange saw tariff rates spiral into triple digits, briefly bringing trade between the two economic giants to a near halt. While tensions eventually calmed, Chinese goods faced tariffs 20% higher by the end of last year compared to the start of the year.
The impact on direct trade has been substantial. The value of US imports from China plunged roughly 30% last year, mirrored by a drop of more than 25% in shipments from the US to China. By the close of last year, Chinese goods constituted less than 10% of America’s overall imports, a level comparable to that seen in 2000 and a sharp decline from over 20% in 2016, the year of Trump’s election. Davin Chor, professor and globalisation chair at Dartmouth University’s Tuck School of Business, describes this shift as ‘very dramatic and it has been very decisive.’ While increased US imports from Vietnam and Mexico, where Chinese firms have boosted investments, suggest some re-routing, Chor believes the decoupling initiated during Trump’s first term has now firmly arrived. He states, ‘I don’t think you should expect things to go back to business as usual.’
Trade Partners Look Elsewhere
The Trump administration’s tariff changes extended beyond the initial ‘Liberation Day’ announcement, encompassing increased levies on specific items such as steel, lumber, and cars, and the termination of rules allowing shipments under $800 to enter the country. Despite these new taxes, overall US imports still increased by more than 4% last year, albeit at a slower pace than in 2024, indicating a re-evaluation rather than a complete plunge into isolationism.
The measures have prompted many international firms to seek buyers beyond the US, as political leaders actively worked to bolster non-US trade relationships. This trend was observed even in countries like the UK, which faced a relatively limited 10% tariff on its goods. Although the US remained the top destination for British goods in 2025, America’s share of exports declined, while countries such as Germany, France, and Poland gained ground. Economics professor Jun Du of Alston University notes that ‘global trade as a whole…has held up quite well,’ but emphasizes that ‘there’s a lot of re-wiring.’
The US did secure some trade changes aimed at increasing opportunities for American businesses abroad. However, Trump’s approach has also alienated allies, leading to shifts that run counter to US interests. Canada, for instance, despite ultimately being largely exempted from US tariffs due to a North America free trade pact, recently agreed to slash its tariffs on thousands of Chinese-made electric vehicles from 100% to approximately 6.1%. This marks a significant pivot towards China and away from the US, a particularly unwelcome development for American car firms that have historically dominated the Canadian market. Petros Mavroidis, a professor at Columbia Law School, highlights that the primary concern ‘is not as much the level of tariffs as it is the unilateralism.’
Tensions with Allies Build
The ripple effects of the tariffs have permeated beyond direct trade, impacting non-commercial areas. Canadian travel to the US, for example, plunged by 20% last year, resulting in an estimated loss of more than $4 billion for the US economy, according to the US Travel Association. These trade tensions have also complicated US efforts to garner international support on various issues, from geopolitical matters like the war in Iran to the extension of a 28-year ban on tariffs on electronic transactions such as streaming.
Professor Mavroidis questions the broader strategic cost, asking, ‘How can you ask for co-operative behaviour when you screw them on trade? You lose your soft power, which was the biggest advantage to the US. All of this is gone now and how do you build it back?’ While direct trade retaliation against the US has remained limited thus far, economist Michael Pearce of Oxford Economics warns that this pattern is not guaranteed to hold. He points out that Trump’s protectionist stance has encouraged other nations to explore similar policies, posing a ‘significant risk’ that ‘over time we do start to see that retaliation in other ways,’ which is ‘how damage from the trade war can spread.’
Prices Rise in the US
The tariffs initially threatened on ‘Liberation Day’ were ultimately scaled back, with many goods exempted and deals struck for lower rates. However, the ambitious promises made by the administration have largely not materialized. Manufacturing spent much of last year in contraction, and foreign investment into the US fell, despite pledges from some firms, such as drugmakers, to boost spending, according to Tax Foundation analysis of government data.
Further complicating matters, the US Supreme Court struck down the ‘Liberation Day’ duties altogether in February, calling into question the surge in tariff revenue collected by the government last year. The US is now obligated to return more than half of the $260 billion it had collected. For now, the primary domestic fallout from the tariffs has been business strains and elevated prices for consumers. Goldman Sachs estimated in October that approximately 55% of the new charges were passed on to consumers last year. This contributed to pushing up the US inflation rate last year by about half a percentage point to roughly 3%, compared to what it would have been without tariffs, according to Pearce. With affordability a key concern for many voters, this issue has added complexity to the Republican platform ahead of mid-term elections in November.
While the immediate macroeconomic impacts on US growth have been somewhat contained, the long-term implications of this protectionist shift remain a subject of intense debate. The White House has vowed to resurrect its policies following the Supreme Court ruling, but the extent of future tariff pushes, particularly in the run-up to elections, is uncertain. As Erica York, vice president of federal tax policy at the Tax Foundation, observes, ‘I don’t think we’ll ever get back to Liberation Day levels,’ suggesting a lasting alteration to the global trade architecture initiated by the Trump administration.
