How I believe Trump's tariffs will change global trade

Is the world on the brink of Trumpcession? With Trump tariffs disrupting global trade and a US-EU trade standoff escalating, trading expert and analyst Inki Cho explores how these aggressive policies could reshape financial markets, supply chains, and investor confidence in 2025.

The Trump administration’s aggressive tariff policies are sending shockwaves through global markets. While many initially believed these tariffs were a mere negotiating tactic, Trump has gone further than expected, imposing steep tariffs on key trading partners. 

This raises a critical question: How will Trump’s tariff strategy shape global trade dynamics in 2025, and what will the broader impact on financial markets be?

Key takeaways

1. Will Trump’s tariffs spark a full-blown trade standoff? With escalating Trump tariffs, global supply chains are being disrupted, and major economies are retaliating. How far will this economic standoff go?
2. Could the US be heading toward a ‘Trumpcession’? Some experts warn that aggressive trade policies and rising costs could slow economic growth. Will these tariffs fuel a downturn or create new opportunities?
3. Is the US-EU trade standoff about to intensify? Tensions are rising as Europe fights back against new US tariffs. Could this clash lead to long-term economic consequences for businesses and consumers?
4. How will financial markets react to the tariff turmoil? From a stronger dollar to volatile stock markets, Trump’s trade moves are sending shockwaves through the economy. What should investors be watching?
5. Which industries stand to win or lose the most? While some American sectors may benefit from protectionist policies, others face major setbacks. Could companies like Apple and Tesla be among the hardest hit?

Rising trade tensions and supply chain disruptions

During his recent presidential campaign, Trump vowed to reduce the US trade deficit and bring manufacturing jobs back to America. He promised to renegotiate trade deals to favor the US, particularly with China, Europe, and Canada.

Now, the US has begun rolling out new tariffs, triggering retaliatory measures from affected nations. In response, Washington has doubled down with even more tariffs. This back-and-forth is not only disrupting global supply chains but also increasing costs for businesses and fueling inflationary pressures.

If Trump continues down this path, global trade could become even more fragmented. The biggest impact will likely be on China, with US-China relations expected to deteriorate further. China has already responded with retaliatory tariffs, and Washington is countering with additional duties. This escalating trade standoff is pushing multinational corporations to reconsider their manufacturing bases, accelerating the shift away from China.

Beyond China, tensions between the US and Europe are also mounting. The Biden administration had previously worked to ease trade frictions, but Trump’s new tariffs on European steel and aluminum have reignited the dispute. The EU has responded with a 50% tariff on American whiskey, and Trump has threatened to hit French and European wines with a 200% tariff. This growing rift could weaken the World Trade Organization (WTO) and push more countries toward protectionist policies.

South Korea and Japan are unlikely to be spared. With semiconductors and batteries being key export industries for South Korea, tighter US restrictions on China could create additional hurdles. Moreover, if Trump pressures both countries to increase their defense spending or targets specific industries with trade measures, economic and diplomatic challenges could intensify.

Market reactions and financial implications

Trump’s tariff policies are not just reshaping global trade—they are also having a significant impact on financial markets.

Stronger dollar and currency volatility

Tariff hikes typically strengthen the currency of the imposing country. If US tariffs make foreign companies’ operations more expensive, demand for US dollars could rise. At the same time, rising trade uncertainty may drive investors toward the dollar as a safe-haven asset, adding to its upward momentum.

US treasury yields

If trade tensions continue to create economic uncertainty, investors may flock to US Treasuries, pushing yields lower. However, the US government’s expanding fiscal deficit could have the opposite effect—higher government borrowing might drive yields up by increasing the supply of Treasury bonds. The ultimate direction of yields will depend on which factor dominates: risk aversion or fiscal policy concerns.

Stock market volatility

The impact of tariffs on US equities will be mixed. Domestic industries like manufacturing, defense, and energy could benefit from the US’ protectionist policies. However, mega-cap multinational corporations, especially tech firms, may struggle with supply chain disruptions and trade uncertainty. Companies like Apple, Tesla, and NVIDIA, which are deeply intertwined with China, could face significant headwinds if the US-China trade conflict escalates.

Final thoughts

Trump’s tariff policies are set to bring lasting changes to global trade and intensify tensions between the US and its key trading partners. As supply chains shift and trade costs rise, inflationary pressures could increase. In financial markets, the dollar’s volatility may rise, Treasury yields could fluctuate, and stock market uncertainty is likely to persist. 

How the global economy and financial markets evolve in 2025 will largely depend on the Trump administration’s next moves on trade policy.