By Uday Jagat
The resurgence of U.S. protectionism under Donald Trump’s second presidency has ignited a new chapter in global trade. The idea of protectionism, long–relegated to economic history books, has roared back onto the global stage with unprecedented force due to Donald Trump’s tariff policies. Levies targeting economic heavyweights like China and pivotal players including India, Russia, and the Middle East represent a paradigm shift in the pillars of global business. The message of the tariffs is blunt: the United States is no longer willing to tolerate “economic treachery,” as seen by Trump, from both allies and adversaries. What began as a campaign promise to revive the American manufacturing industry has morphed into a global economic realignment, triggering disruptions in supply chains and threatening long-term economic growth. The tariffs are not just straining bilateral relations with trading partners, but are entirely distorting global trade relations and prompting strategic realignments.
Trump’s tariff policies have brought US levies to their highest levels since the 1930s, marking a dramatic shift in US trade policy. As notes Eswar Prasad, a professor of trade policy and economics at Cornell University, “Trump has engineered a new era of US trade protectionism that will eventually reverberate through the entire global trading system.” The rationale behind this policy is deeply rooted in economic nationalism. Trump’s administration argues that unfettered globalisation has hollowed out the American industry and has allowed rival nations to exploit U.S. market access without reciprocal fairness. The new tariff regime – framed as a patriotic correction of past policy missteps – aims to restore American economic sovereignty by taxing imported goods and incentivising domestic production. In practice, these measures are reshaping the contours of international trade in ways that extend far beyond U.S. borders. While some partners have been able to negotiate concessions, and reduced tariffs, others have found themselves squeezed between Washington’s demands and their own geopolitical balancing act.
China, unsurprisingly, has borne the brunt of the new regime. But instead of retreating, Beijing has responded with tactical flexibility. Chinese exporters have increasingly rerouted goods through intermediary countries to sidestep US levies: research by Capital Economics shows that in May 2025 alone, roughly $3.4 billion worth of Chinese exports were funnelled through Vietnam, a 30% year-on-year increase. Similar patterns have emerged in Indonesia and India, underlining the remarkable adaptability of global supply chains. Yet this evasive manoeuvring only further complicates global trade, making it harder for policymakers and investors to track the flow of goods.
In Europe, analysts say excess Chinese exports are more likely to be consumed than trans-shipped, meaning Europe may become a final destination for a portion of redirected Chinese exports and not just a waypoint for further shipment. EU officials say they have detected increased advertising by Chinese companies as they target European consumers instead of Americans. China’s increased market penetration is also visible in other parts of the world. Monica Malik, chief economist at Abu Dhabi Commercial Bank, notes that the visibility of Chinese-branded products including electric vehicles, smartphones and other consumer electronics had grown rapidly in the UAE in the last couple of years. Expanding to new markets helps China sustain export volumes but thickens layers of opacity, complicating trade and adding multiple levels of intermediaries.
Vietnam’s case illustrates how carefully calibrated diplomacy can preserve access to U.S. markets. Initially hit with a threatened 46 percent tariff on key exports, Vietnam swiftly negotiated a deal. Most tariffs were trimmed to 20 percent, and U.S. goods would enter Vietnam duty-free. Importantly, goods deemed by Washington to be illegally transshipped via Vietnam will face a higher levy of 40%, aimed at deterring opportunistic routing of Chinese products through Vietnam. The impact was immediate – exports to the U.S. climbed 26 percent in July alone to $14.2 billion, while Vietnam’s overall exports rose 16 percent to $42.3 billion. Vietnam’s agility reveals how mid-sized, politically–aligned exporters can navigate U.S. trade shocks, balancing concessions with resilient economic performance and geopolitical relevance.
Developing economies, however, are feeling a significant strain. Tensions escalated between the two largest economies in the Americas when Trump imposed significant tariffs on Brazil. The US added a 40% tariff on top of the existing 10% baseline, bringing the total to 50% for many Brazilian imports. The tariffs are unusually politically motivated, with Trump citing motivations such as the trial of former Brazilian president Jair Bolsonaro and alleged attacks on free speech. This move is part of a broader campaign against Brazil’s democratically-elected government and its Supreme Federal Court; it is set to have a substantial impact on Brazilian exports, particularly in the agricultural sector. Embraer, the country’s flagship aircraft manufacturer, faces an extra $9 million in costs per jet sold to American buyers, while steel shipments are projected to drop by 1.6 million tons. Similarly, India, once a prospective strategic partner for Washington, found itself unexpectedly targeted by a 50% tariff on select goods after Trump accused Delhi of indirectly funding Russia’s war in Ukraine through oil imports. The move has not only strained US-India trade relations but has also injected fresh uncertainty into South Asia’s already delicate geopolitical balance.
Overall, the global response to Trump’s tariffs has been less combative than expected. Aside from targeted pushback from China and Canada, most nations have avoided full-scale trade wars. This restraint has allowed Washington to collect significant customs revenue without igniting an immediate global feud. But the absence of retaliation does not equate to acceptance: many states are simply recalibrating their long-term strategies, seeking to deepen regional ties and form new trade corridors that reduce exposure to U.S. policy shifts. The longer-term consequences for the global economy are difficult to forecast but likely profound. For the U.S., the tariffs could deliver short-term gains for protected industries, but they risk eroding competitiveness in export sectors as other nations form new pacts. For the rest of the world, the tariffs could catalyse a reconfiguration of trade architecture, with major economies such as the EU, Brazil, and India forging stronger trade alliances, bypassing U.S. markets in favour of more stable partners. As a result, supply chains may become more regionalised with “friend-shoring” gaining traction.
Such impacts remain a subject of debate among economists and policymakers, however. Trump argues that the tariffs have “turned the tide” on global trade, claiming they are “making America GREAT & RICH Again”. He asserts that the US has successfully countered what he perceives as decades of unfair trade practices. On the other hand, the tariffs are expected to make US consumers benefit less from imports and cause American exports to shrink. There are concerns that this could lead to increased inflation and have a negative impact on economic welfare, as measured in real terms per capita GDP over time. Regarding global supply chains, some experts suggest that while overall trade with the US might decrease, the rest of the world could react by deepening trade integration among themselves. This could potentially lead to a decoupling of the US from certain global trade networks, with other countries intensifying their trade relationships to compensate.
In conclusion, Trump’s tariff regime has undoubtedly had a significant impact on global trade, generating substantial revenue for the US government and altering the competitive landscape for businesses worldwide. However, the long-term consequences of this protectionist approach remain uncertain. While the US has so far avoided widespread retaliation, the potential for increased inflation, disrupted supply chains, and altered global trade patterns looms large. While Trump’s tariffs may provide short-term bargaining power and appeal to his domestic political base, they risk undermining the very principles of open trade that have underpinned decades of global growth. The danger is that by prioritising unilateral gains over cooperative stability, Washington could accelerate a fracturing of the international trading order that may prove to be costly in the long run. As the situation continues to evolve, the global economy will need to adapt to this new trade paradigm, with potential winners and losers emerging across different sectors and regions.
The views expressed in this article are the author’s own and may not reflect the opinions of The St Andrews Economist.
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