President Donald Trump’s tariffs since taking office seem to have thrown off global trade.
“It seems like the administration is rowing back on its harshest stance on tariffs in order to mitigate some of the inflation/pricing issues,” Chris Iggo, chief investment officer for Core Investments and chair of the Investment Institute at AXA Investment Managers, said on a 2026 outlook call.
“So less of a concern to markets. Could be marginally helpful to the inflation outlook if tariffs are reduced or at least not further increased.” Ahead of midterm elections later in the year, “a confrontational trade war with China would not be great – a deal would be politically and economically better for the U.S. outlook,” he said.
Below is what one may expect going forward.
What Trump’s trade policy changed
Trump’s trade approach marked a clear break from decades of U.S. policy favoring multilateralism and lower trade barriers. Tariffs were used aggressively as leverage against major partners such as China, the EU, Canada, and Mexico, often imposed quickly and sometimes justified on national security grounds.
What is not fully settled is how permanent this policy shift will be. While the philosophy has clearly changed, future administrations or court rulings could still modify or unwind some measures, making the long-term direction of U.S. trade policy uncertain.
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How global trade was thrown off balance
Tariffs raised costs across global supply chains, forcing companies to reroute trade, change suppliers, or absorb higher prices. Trade flows did not collapse but became less efficient, with more friction and duplication.
The degree of long-term damage is uncertain. Some analysts argue trade volumes will eventually normalize through adjustment, while others believe lost efficiency and trust may permanently cap trade growth below past trends.
The role of uncertainty
Policy unpredictability has arguably been as disruptive as the tariffs themselves. Sudden changes, exemptions, and threats made long-term planning difficult, discouraging investment—especially in manufacturing, autos, and technology.
It remains unclear how long this uncertainty will persist. If trade rules stabilize, investment could rebound; if not, continued hesitation could suppress growth well into 2026 and beyond.
Winners, losers, and uneven effects
Some domestic producers benefited from protection, while exporters—particularly in agriculture and advanced manufacturing—were hurt by retaliation and lost market access. Internationally, many countries sought to diversify trade away from the U.S.
What’s uncertain is whether protected industries can remain competitive without tariffs, and whether exporters will regain lost markets even if barriers ease.
Structural shifts that didn’t reverse
Many firms have redesigned supply chains to prioritize resilience, diversification, and regionalization. These changes raised costs but reduced exposure to political risk.
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It is not yet clear how permanent these shifts will be. Some supply chains may revert if trade tensions ease, while others may remain structurally altered due to sunk costs and strategic caution.
Most forecasts point to slower and more fragmented global trade compared with the pre-trade-war era. Growth is expected to continue, but with less integration and more regional blocs.
However, forecast ranges vary widely. Institutions disagree on how much tariffs will weigh on growth, and global trade could perform better—or worse—depending on policy choices and geopolitical developments.
Durable trade agreements, clearer rules, and reduced tariff uncertainty could improve confidence and investment. Conversely, renewed tariff escalation would deepen fragmentation.
The timing and likelihood of these turning points are highly uncertain, especially given election cycles, geopolitical tensions, and legal challenges to existing tariffs.
Trump’s tariffs clearly reshaped global trade by raising costs and increasing uncertainty. What remains uncertain is how lasting these effects will be, whether trade rules stabilize, and whether global trade can regain momentum by 2026—or settle into a permanently more cautious, regionalized system.