US President Donald Trump’s tariff policies, including a 10% baseline on imports and higher rates on sectors like steel and aluminum, are disrupting global trade.

Major companies, such as Electrolux, Volvo Cars, Logitech, and Diageo, have revised forecasts or abandoned targets due to unpredictable tariff outcomes.

Smaller ecommerce firms are also struggling, especially after the removal of duty-free treatment for packages under US$800 from China.

China and the US are negotiating, with Beijing considering a US offer to address the current 145% tariffs and its own 125% retaliatory levies. Meanwhile, the US may reach agreements with countries like India, South Korea, and Japan to prevent further tariff hikes.

Global economic growth forecasts have been downgraded, and factory activity is contracting in China and the UK.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Historical parallels show tariffs’ lasting economic damage

The current tariff levels represent a dramatic break from decades of U.S. trade policy.

America’s effective tariff rate has surged to around 23-27%, reaching levels not seen since 1903 1, marking a stark reversal from the post-WWII consensus that favored trade liberalization 2.

This shift echoes the Smoot-Hawley Tariff Act of 1930, which prompted retaliatory measures that saw U.S. imports from Europe plummet from $1.33 billion in 1929 to just $390 million by 1932, while exports collapsed from $2.34 billion to $784 million in the same period 3.

Economic history suggests the impacts will be widespread and persistent. The IMF projects tariffs could reduce global GDP by 0.5-1% 4, with similar patterns to previous protectionist eras that deepened economic downturns rather than protecting domestic industries.

The Yale Budget Lab estimates these tariffs will cost the average American household $4,700 in 2024 dollars through price increases, significantly reducing purchasing power across the economy 1.

2️⃣ Uncertainty itself becomes a major economic drag

Beyond the direct cost of tariffs, the unpredictability of trade policy is forcing businesses to delay investments and alter strategies, creating a “demand shock” that ripples through global supply chains.

Front-loading has become common practice, with German factories rushing to complete orders before tariffs take effect. This potentially creates artificial activity spikes that mask deeper problems and sets up economic backlash in the coming months, according to economists 5.