As the global economy adjusts to rising protectionist measures, fresh concerns are emerging over the future of cross-border trade. A senior UN official warned that escalating tariffs introduced by the US could result in a 3 per cent contraction in global trade volumes, while also triggering a realignment of export destinations away from traditional powerhouses like the US and China.
Last week, US President Donald Trump announced a sweeping tariff framework, targeting a broad range of imports. Although the White House has introduced a temporary 90-day suspension on “reciprocal tariffs” for most nations, China has been notably excluded from this grace period. In response, Beijing has imposed steep retaliatory duties of 125 per cent on American imports, reported PTI.
Export Patterns Begin To Shift
Pamela Coke-Hamilton, Executive Director of the International Trade Centre, addressed the ongoing situation on Friday and noted the early signs of long-term shifts in global trade flows.
“Global trade could shrink by 3 per cent, with significant long-term shifts in trade patterns and economic integration,” she said.
She highlighted Mexico as one of the countries witnessing major adjustments, with exports that once moved toward the US, China, and Europe now seeing gradual gains in markets like Canada, Brazil, and India. Likewise, Vietnam is beginning to redirect trade activity away from the US and China, instead focusing on the Middle East, North Africa, the European Union, and Korea.
The apparel sector, a crucial source of employment and economic activity in developing countries, is also feeling the pressure. Coke-Hamilton pointed to Bangladesh, the world’s second-largest garment exporter, as a key example. Should the proposed 37 per cent reciprocal tariff on Bangladeshi textiles come into force, it could slash $3.3 billion in annual exports to the US by 2029.
She emphasised that developing nations must prioritise diversification, value addition, and regional integration to shield themselves from future global shocks, be it due to pandemics, climate-related disasters, or abrupt policy changes.
“So there are opportunities for developing countries not just to navigate times of uncertainty, but to proactively prepare for the long haul,” she said.
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Tariff War Enters A Strategic Phase
Initial estimates from the International Trade Centre and French research institute CEPII suggested that, even before the 90-day delay and further tariff escalations were introduced, global GDP could see a 0.7 per cent decline by 2040 if the measures continued. Countries such as Mexico, China, Thailand, several Southern African nations—and even the US—are forecasted to bear the brunt of these economic tremors.
Commenting on China’s 125 per cent tariffs on US goods, Wendy Cutler, Vice President and Managing Director of the Asia Society Policy Institute (ASPI) in Washington DC, said, “China is in for the long haul. Beijing has also admitted that it has reached the endpoint in retaliating with tariffs, perhaps signalling that it has lots of other tools in its arsenal that could be activated further should the US respond today with additional measures.”
She added that with tariffs now at 145 per cent for Chinese goods entering the US and 125 per cent for US goods entering China, most trade between the world’s two largest economies has effectively come to a standstill.
“How long these tariffs remain in place is an open question, but at some point, both Washington and Beijing will recognise the need to re-engage and manage this deteriorating situation,” she said.
Daniel Russel, ASPI’s Vice President of International Security and Diplomacy, observed that Chinese President Xi Jinping appears to be steering clear of direct escalation.
He said Xi is “betting that Trump’s tariff tantrum will collapse under the weight of the US market response.”
Russel also pointed out that Beijing’s latest moves indicate a strategic pivot away from tit-for-tat measures.
“By declaring it will ‘ignore’ future US tariff hikes, Beijing is not trying to win the trade war—it’s trying to outlast it and to outmanoeuvre Trump. Beijing’s goals are to buffer its economy, expand diplomatic clout, and keep pressure on US allies to hedge. Xi’s Southeast Asia tour is part of a strategy to shore up China’s economic ties in the region while Washington lashes out and alienates its partners,” Russel said.
