A significant escalation in this trade policy was the recent announcement of a 25% tariff on Chinese technology imports valued at approximately $50 billion. The administration justified these tariffs as a means to curtail China’s alleged coercive trade practices, particularly in regard to forced technology transfers and intellectual property theft. These tariffs specifically target key sectors such as aerospace, robotics, and automotive industries, areas that are crucial to China’s long-term industrial strategy. However, in response, China imposed retaliatory tariffs ranging from 15% to 25% on US imports, impacting American exports such as coal, liquefied natural gas, and crude oil. The Chinese ministry of commerce condemned the US actions as violations of World Trade Organization rules, arguing that these tariffs harm normal economic and trade relations between the two largest economies in the world.

The ongoing trade war between the US and China has raised significant concerns about global economic stability. The Organisation for Economic Co-operation and Development (OECD) has warned that the prolonged trade tensions between the two nations will likely slow global economic growth. According to OECD projections, global Gross Domestic Product (GDP) growth is expected to slow to 3.1% in 2025 and 3% in 2026, with inflationary pressures remaining high. In the US, economic growth is projected to decline from 2.3% in 2024 to 2.2% in 2025 and further down to 1.6% in 2026. The OECD has urged nations to work within the global trading system to prevent escalating trade barriers, warning that failing to do so could lead to reduced living standards, increased inflation, and declining consumer purchasing power. These concerns align with growing domestic anxiety about the impact of tariffs, as reflected in a Harris Poll conducted for The Guardian, which found that 72% of Americans worry about the economic repercussions of Trump’s trade policies, up from 61% in January.

While China remains the primary focus of Trump’s tariff strategy, its impact extends beyond the US-China relationship. Other key US trading partners, including India, Canada, Mexico, and the European Union, have also been affected by tariff measures. The OECD has specifically highlighted that Canada’s economic growth may be halved as a result of US tariffs, while Mexico faces the possibility of an economic downturn. These consequences underscore the broader effects of the administration’s trade policies, which, while aimed at protecting American industries, have inadvertently strained economic ties with longstanding allies. Moreover, the tariffs have prompted companies to rethink global supply chains, with many seeking alternative production sites to mitigate the financial burden. This has led to increasing interest in reshoring manufacturing to North America, but the process is fraught with challenges, including labor shortages and rising production costs.

Beyond economic growth, another significant consequence of the Trump administration’s tariff policy is its impact on inflation and market volatility. The imposition of tariffs has driven up the costs of imported goods, contributing to inflationary pressures that are being felt by businesses and consumers alike. Australian banking executives have warned that the ongoing trade war could exacerbate global inflation, leading to economic slowdowns in multiple regions. Matt Comyn, CEO of the Commonwealth Bank of Australia, has pointed out that tariffs create inefficiencies in trade, which ultimately drive up costs for consumers. Similarly, the National Australia Bank has cautioned that rising tariffs may reduce the likelihood of further interest rate cuts, complicating monetary policy decisions in an already uncertain economic environment. In the US, financial markets have reflected these concerns, with the S&P 500 experiencing a 7.5% decline and the Nasdaq falling by over 10% in the past month, reflecting investor anxiety about the long-term consequences of Trump’s tariff measures.

Despite these economic challenges, the administration maintains that its trade policies are necessary to protect American industries and secure long-term economic benefits. Proponents argue that tariffs are an essential tool in forcing China to reform its trade policies, curb intellectual property theft, and establish a fairer competitive environment. Additionally, the administration has emphasised that tariffs are part of a broader effort to encourage companies to invest in domestic manufacturing, thereby reducing reliance on foreign supply chains. However, critics argue that these policies lack a coherent long-term strategy and fail to account for the complexities of global economic interdependence. Julius Krein, editor of American Affairs, has argued that tariffs should be implemented alongside other industrial policies, including tax incentives for domestic production, workforce development programs, and strategic investment in key industries. Without such a comprehensive strategy, tariffs alone may not be sufficient to achieve the administration’s stated goals.

Furthermore, the broader geopolitical implications of Trump’s trade war cannot be overlooked. The escalating economic tensions between the US and China have led to increased diplomatic strain, with both countries adopting increasingly nationalistic rhetoric. While President Trump has hinted at potential diplomatic engagements with Chinese President Xi Jinping in the near future, significant barriers remain. The trade dispute has also fueled tensions over issues such as Taiwan and regional security, complicating broader US-China relations. Additionally, by targeting European allies and North American trade partners with tariffs, the US risks alienating key allies at a time when global economic cooperation is more critical than ever.

In assessing the impact of Trump’s tariff policies, it is evident that while they may yield some short-term gains for specific industries, they come at a substantial cost. The combination of slower economic growth, rising inflation, market instability, and strained international relationships raises concerns about the long-term sustainability of this approach. Moreover, the increasing discontent among American consumers and businesses suggests that domestic support for these policies is far from unanimous. As the administration continues to navigate its aggressive trade agenda, it must consider whether its current trajectory is achieving the intended economic benefits or merely exacerbating global uncertainty. A more strategic and balanced approach one that integrates tariffs within a broader industrial and economic policy framework may be necessary to achieve sustainable economic growth while maintaining positive international relations.

Ultimately, the Trump administration’s tariff policies underscore the challenges of using protectionist measures in a highly interconnected global economy. While the goal of strengthening American industries and countering unfair trade practices is understandable, the approach has led to significant unintended consequences. The slowdown in global growth, inflationary pressures, and disruptions to international trade relationships highlight the risks associated with an overly aggressive tariff strategy. Moving forward, a reassessment of these policies, coupled with a commitment to multilateral cooperation, may be necessary to strike a balance between economic protectionism and global economic stability.

This article is authored by Gunwant Singh. scholar, international relations and security studies, Jawaharlal Nehru University, New Delhi.