The return of President Donald Trump to the White House in 2025 kicked off an exhilarating year in global trade.
Waves of tariffs against U.S. trading partners pushed import taxes to levels unseen since the Great Depression.
This surge in tariffs not only unsettled financial markets but also initiated extensive negotiations over trade and investment agreements.
His trade policies – and the global reaction to them – will remain pivotal in 2026, facing significant hurdles.
Trump’s strategies, aimed at rejuvenating a waning manufacturing base, raised the average tariff rate to nearly 17%, up from under 3% at the close of 2024, according to Yale Budget Lab. These tariffs are now generating approximately $30 billion a month for the U.S. Treasury.
World leaders were urgently seeking agreements in Washington to negotiate lower rates, often in exchange for commitments of billions in U.S. investments. Framework agreements emerged with several key trading partners, including the European Union, United Kingdom, Switzerland, Japan, South Korea, Vietnam, and others. However, a conclusive agreement with China remains elusive, despite multiple negotiation rounds and a direct meeting between Trump and Chinese leader Xi Jinping.
The EU received criticism for its deal, which imposed a 15% tariff on its exports and offered vague promises of U.S. investments. The then-Prime Minister of France, Francois Bayrou, referred to it as an act of submission and described the day as “sombre” for Europe. Others viewed it as the least unbeneficial deal available.
European exporters and economies have generally managed to adapt to the new tariff environment, aided by certain exemptions and new market opportunities. French bank Societe Generale estimated the total direct impact of the tariffs amounted to just 0.37% of the region’s GDP.
Conversely, China’s trade surplus has continued to defy Trump’s tariffs, surpassing $1 trillion. China has successfully diversified its markets, advanced its manufacturing capabilities, and leveraged its strength in rare earth minerals—vital components for the West’s security framework—to resist pressure from the U.S. and Europe to mitigate its surplus.
Surprisingly, the anticipated economic disaster and soaring inflation from Trump’s tariffs did not materialize. The U.S. economy did experience a slight contraction in the first quarter while scrambling to import goods before the tariffs were implemented but rebounded swiftly. The economy continues to grow at a robust rate, propelled by substantial investments in artificial intelligence and strong consumer spending.
The International Monetary Fund raised its global growth forecasts twice following the announcement of Trump’s tariffs in April, as uncertainty lessened and agreements to lower previously announced rates were confirmed.
While U.S. inflation remains higher than average partly due to tariffs, economists and policymakers now anticipate the effects to be less severe and more transient than initially expected. Cost sharing of import taxes has occurred across the supply chain among producers, importers, retailers, and consumers.
A growing uncertainty for 2026 lies in the fate of Trump’s tariffs. A legal challenge against the term “reciprocal” tariffs imposed on goods from specific countries and those tied to fentanyl from China, Canada, and Mexico was debated before the U.S. Supreme Court in late 2025, with a ruling anticipated in early 2026.
The Trump administration claims it can pivot to more traditional legal grounds to maintain tariffs should it lose the case. However, these alternatives tend to be more cumbersome and limited, which could lead to a renegotiation of current agreements or introduce a new era of ambiguity about the future of tariffs.
Equally critical for Europe is the evolution of its trade relationship with China—a historically significant market for its exporters. The weakening of the yuan and the ascending value chain of Chinese companies have been advantageous for them.
Meanwhile, European companies have encountered challenges in penetrating the sluggish domestic Chinese market further. A vital question for 2026 revolves around whether Europe will finally implement tariffs or other measures to address what some officials are labeling the growing “imbalances” in China-European Union trade.
The prospect of solidifying a U.S.-China agreement also looms large. Existing agreements reached in this year’s negotiations will lapse in the latter half of 2026, with tentative plans for Trump and Xi to meet twice throughout the year.
Lastly, the trade agreement with Trump’s largest trading partners, Canada and Mexico, is slated for reassessment in 2026 amid mixed signals about whether Trump will allow it to lapse or seek to modify it to better suit his policies.
“It appears that the administration is moderating its most aggressive tariff positions to alleviate inflation and price concerns,” stated Chris Iggo, chief investment officer for Core Investments and chair of the Investment Institute at AXA Investment Managers in a 2026 outlook discussion.
“This reduced tension might slightly benefit market stability and assist with the inflation outlook if tariffs are decreased or at least not further increased.” As midterm elections approach, “a confrontational trade conflict with China wouldn’t be favorable—an agreement would be both politically and economically better for the U.S. perspective,” he concluded.
