Former President Donald Trump’s latest trade action has sent shockwaves through the global economy. On April 2, 2025, Trump announced a sweeping round of tariffs on over 90 countries. His avowal, filled with nationalistic fire, claimed that “many countries have ripped us off left and right.” In a histrionic tone, he promised that it was now “America’s turn to do the ripping.”
This announcement activated a domino effect. Stock markets around the globe crashed. From Hong Kong and Tokyo to London and New York, the world witnessed sharp losses. Economists now warn of an imminent global recession.
The first round of Trump’s tariffs targeted China with a 34 percent import duty
The first round of Trump’s tariffs targeted China with a 34 percent import duty. Two days later, China responded with the same tariff on U.S. goods. Trump requited with a threat of a 50 percent tariff if China didn’t reverse its decision. China stood firm. On April 9, the U.S. imposed the additional 50 percent tariff which China immediately proportioned.
This back-and-forth has turned into a full-scale trade war between the world’s two largest economies. The global economy is now caught in the crossfire.
A tariff is a tax on imported goods. Governments use tariffs for two main reasons — to raise revenue and to protect local industries. By making foreign goods more expensive domestic products become more competitive. In theory, this can help local businesses grow.
Many countries use tariffs carefully and strategically. For example, South Korea once imposed high tariffs on rice to protect its struggling farmers. Over time with government support local farmers modernized. Once they became globally opportunistic those tariffs were reduced.
Tariffs, when used wisely and temporarily, can help a country. But when used aggressively and without coordination they can create economic appalls.
Unlike previous administrations that worked with allies and global trade bodies, Trump acted independently. He used emergency powers to justify the tariffs calling the trade deficit a national emergency. “A very national emergency that threatens our security,” he said.
A unique formula was used to determine tariff rates. It took a country’s trade deficit with the U.S. divided by the value of imports and halved the result. This led to erratic rates: 49 percent on Cambodia, 46 percent on Vietnam, 26 percent on India and 17 percent on Israel. Even China which ended up with a 125 percent tariff faced an extreme interpretation of this formula.
The most bizarre part was when Trump imposed tariffs on uninhabited islands near Antarctica —home only to penguins.
China, Canada and the European Union imposed retaliatory tariffs. What made it worse is that many of these were targeted at industries in U.S. states that supported Trump — corn, poultry, cars and steel
Countries didn’t stay silent. China, Canada and the European Union imposed retaliatory tariffs. What made it worse is that many of these were targeted at industries in U.S. states that supported Trump — corn, poultry, cars and steel. The idea was clear: hit Trump where it hurts politically.
This type of retaliation can create political pressure at home. But for the rest of the world, it introduces dubiety especially for businesses that reckon on stable trade policies.
Tariffs don’t just hurt foreign businesses. They hit consumers at home. In a globalized economy, even products made in the U.S. often count on imported parts or raw materials. When those imports get more expensive prices go up.
Popular American creator Mr Beast tweeted that even his chocolates which are made in the U.S. now cost more due to increased import costs for ingredients like cacao beans from Africa
Popular American creator Mr Beast tweeted that even his chocolates which are made in the U.S. now cost more due to increased import costs for ingredients like cacao beans from Africa. He noted that producing outside the U.S. might now be cheaper.
Hoover’s Smoot-Hawley Tariff Act of 1930 led to widespread retaliation. As a result global trade dropped by 66 percent regressing into the Great Depression
Trump is not the first to believe in tariff-heavy policies. In the late 1800s and early 1900s, Republican leaders like William McKinley and Herbert Hoover imposed steep tariffs. Hoover’s Smoot-Hawley Tariff Act of 1930 led to widespread retaliation. As a result global trade dropped by 66 percent regressing into the Great Depression.
Since World War II the United States has been a champion of free trade. It helped build the World Trade Organization (WTO) which intends to reduce tariffs and trade barriers globally. Now with Trump reversing course many countries are unsure of America’s commitment.
Singapore’s Prime Minister warned that large-scale trade wars in the past led to armed conflicts — even World War II. The weakening of global institutions and rise of protectionism, he said, is a dangerous trend.
From an economic theory standpoint, tariffs fall under the umbrella of protectionist policy. Ad interim they can shield domestic industries. However, long-term success depends on careful design, clear goals and international cooperation.
When used recklessly, as in Trump’s case, they become a form of economic nationalism. According to game theory, this kind of zero-sum thinking — where one country must lose for another to win — leads to repeated retaliation, inaptitudes and reduced global welfare.
The “prisoner’s dilemma” applies here. If both countries cooperate, they both benefit. If both defect (retaliate), both lose. Trump’s strategy seems based on immediate wins without regard for cooperative outcomes.
The proceeding trade strains and unpredictable tariff policies are casting a shadow over the global economy. If this situation abides, companies will struggle to make informed decisions about investments, expansions and hiring which will lead to a slowdown in economic growth. As a result, consumers will face higher prices for goods and services diminishing their purchasing power and striking their quality of living investments, expansions and hiring which will lead to a slowdown in economic growth.
The misdoubt surrounding trade policies may also prompt companies to reassess their supply chains potentially whipping investments away from the United States and towards more stable markets. This could lead to job losses, factory closures and reduced economic activity in the United States.
The global economy may experience increased volatility making it challenging for policymakers to find solutions that benefit all parties involved
The trade war with China may drag on causing economic insecurity and concerning people worldwide. The ripple effects of this trade war could be felt across various industries from technology and manufacturing to agriculture and finance. The global economy may experience increased volatility making it challenging for policymakers to find solutions that benefit all parties involved.
In the long run, this uncertainty will have extensive outcomes which will impact daily lives. From higher prices and reduced economic opportunities to job insecurity and decreased economic growth that affects the trade war will be widespread.
If major economies continue to retaliate the effects could be severe:
- Slower global growth
- Price increases on essential goods and raw materials
- Supply chain fragmentation
- Political instability in nations hit hardest by trade
Most dangerously, long-standing global alliances may weaken. With countries pursuing self- interest over cooperation the world risks sliding into deeper divisions.
Tariffs are a tool — not a weapon. Used wisely, they protect and support local growth. Used recklessly, they endanger global stability. Trump’s tariff war has placed the world at a crossroads. The next few months will reveal whether global leaders can steer towards cooperation or if economic nationalism will lead us into a darker era.
Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.
