Raj Bora
Published on

Global Trade in the Trump Era: Tariffs, Trade Wars, and Geo-Political Shifts

Authors

Introduction

Ever since President Trump took office, international trade has been one of his key areas of focus to improve industrial growth and employment in the domestic arena.

The recent reciprocal tariffs announced by President Trump are expected to have a significant impact on global supply chains and logistics corridors. In this article, we aim to analyze and understand trade statistics in the context of these decisions.

Let’s Get Into It: What's Happening?

Self-reliance has been a dream for every country—not just in the 21st century, but throughout history. Trade began when early humans felt the need to exchange what they had in surplus for what they lacked. It started as a simple barter system, eventually evolving into the quantification of goods based on their worth—whether in terms of use, shelf life, or the risk involved in acquiring them. This progression led to the use of precious metals like gold, which continues to underpin modern economies and dollar-backed global trade.

As such, countries trade with each other regardless of cultural, historical, or social differences. We are interdependent—that’s why we buy from and sell to one another.

Who Are the Top Countries the U.S. Imports From?

The United States' top trading partners in terms of imports are:

  • Mexico
  • China
  • Canada

(These three countries were included in the initial round of tariffs announced shortly after the inauguration as well).

Top Imports

The U.S. is no longer a manufacturing-led growth economy. According to US Department of Commerce NIST, manufacturing accounts for only about 10.2% of the country’s GDP. Several factors have contributed to this decline:

  • Over the last three decades, the U.S. economy has shifted toward high-tech and skilled jobs, changing the primary drivers of growth.
  • Environmental concerns associated with operating large-scale industries and managing their pollution.
  • The availability of cheap labor in other countries, which encouraged corporations to relocate factories to Asia.

What Does the U.S. Primarily Import?

  • Machinery, boilers, and nuclear reactors
  • Electronics and electrical appliances
  • Vehicles (other than railway and tramway)
  • Pharmaceutical products and medical equipment
  • Mineral fuels and oil
  • And much, much more: Total imports in 2024 amounted to $3.357 trillion!

All major household items and tech products being imported are expected to get costly.

Who Are the Top Countries the U.S. Exports To?

America’s neighbors, Canada and Mexico, are its two biggest trade partners, accounting for over one-third of U.S. exports.

Top Exports

While tariffs are typically levied on imports, political negotiations around them inevitably impact exports as well. For example:

These shifts could drastically alter global trade routes.

Total U.S. exports in 2024 amounted to $2.063 trillion!

Interestingly, around 17% of these were re-exports—goods not manufactured domestically but exported after being imported and processed, stored, or repackaged.

Exports Distribution COMTRADE

Tariff Calculation

Until now, tariffs were mostly applied on a Most-Favored-Nation (MFN) basis, as per the World Trade Organization (WTO) guidelines, with the U.S. maintaining single-digit or duty-free rates for many countries. However, new tariffs effective April 9, 2025, reflects trade disparities between the U.S. and each trading partner.

The new formula calculates tariffs proportional to the trade deficit the U.S. has with each country, as shown below:

Δτi=xi−miε⋅φ⋅mi\Delta \tau_i = \frac{x_i - m_i}{\varepsilon \cdot \varphi \cdot m_i}

Where:

  • **Δτi\Delta \tau_i** = Change in tariff rate for country i
  • **xix_i** = U.S. exports to country i
  • **mim_i** = U.S. imports from country i
  • **ε\varepsilon** = Price elasticity of import demand (assumed 4)
  • **φ\varphi** = Elasticity of import prices (assumed 0.25)

Example: Vietnam

  • Imports from Vietnam (2024): $142.48 billion
  • Exports to Vietnam (2024): $13.10 billion
  • Trade deficit: $129.38 billion

Using the formula:

Tariff = $129.38B / (4 × 0.25 × $142.48B) = 90.8%

However, the U.S. has “kindly” decided to impose only half the calculated rate, resulting in a 46% tariff on imported goods from Vietnam.

Trade and Tariffs

In contrast, countries with no trade deficit—like Australia and Singapore, which have free trade agreements with the U.S. and export more to the U.S. than they import—will still face a base tariff of 10%. These changes may have serious ripple effects on future treaties and trade agreements, particularly if previous commitments are not upheld.

What Happens Next?

1. Domestic Market Volatility

With tariffs being implemented suddenly and at such scale, supply chains—especially for essentials like agricultural products—will face major disruptions. Importers are unlikely to absorb the tariff costs and will pass them on to consumers. If they do absorb them, businesses may cut costs through staff reductions or lower wages. Either way, the domestic market could see a rise in inflation and/or unemployment in the coming months.

2. Global Supply Chain Re-routing

Vietnam exported $ 109.46 billion worth of goods to the U.S. in 2022 — about 30% of its total exports. Vietnam also imported $117.65 billion worth of goods from China (33% of total imports), while imports from the U.S. were only 4%. Vietnam basically acts as an intermediate or external trade economy due to ease in tariffs till now. This illustrates how sanctions and tariffs are often circumvented through third-party countries.

📌 Example: Chinese goods may now route through Vietnam or other trade partners with less tariffs before reaching the U.S. market, making enforcement tricky and introducing new complexities.

3. What If Tariffs on U.S. Goods Are Reduced Abroad?

Sounds like good news, right? It aligns with the administration’s goals—but it’s not that simple. Several critical questions remain:

  • Are tariffs the only barrier preventing U.S. goods from thriving internationally? No; competition from domestic and regional producers also plays a role.

  • Can U.S. logistics and manufacturing scale up to meet new demand quickly? Not immediately. Scaling production involves planning, investment, safety checks, and quality control, which takes months, not weeks.

  • Is there enough capital to support such expansion right now? Possibly not.

So, even if tariffs are lowered elsewhere, logistical bottlenecks and competitive pricing remain key challenges.

4. Geo-Political Restructuring

Some countries, like Vietnam, responded with offering to reduce tariffs on U.S. goods to zero, but the Trump administration reportedly dismissed the offer as “Not Enough.”

Through my experiences, I've learned a valuable lesson about negotiations:

Each card holds different value for each stakeholder.

Vietnam doesn’t import much from the U.S. and can’t significantly increase its imports to match exports due to lack of domestic consumption. So, this isn’t just about tariffs—this is a strategic negotiation, with the U.S. trying to bring countries to the table, negotiating one-on-one, simultaneously.

This reminds me of a game of multiplayer chess where Magnus Carlsen was playing with 8 players at once. This is similar but with much higher stakes, with America playing multiple boards at once. If things don’t go as planned, we could be looking at a once-in-a-century economic-political restructuring.

These negotiations involve more than just trade — they include:

  • Making inroads for American companies,

  • Defence lobbying and contracts,

  • Treaties and Alliances, and more...

📌 Examples:

Conclusion

Well this is still an ongoing event, history being written live. The global trade landscape is shifting rapidly—and the U.S., under President Trump's renewed tariff strategy, is at the center of this transformation. While the intention is to correct long-standing trade imbalances and boost domestic industry, the ripple effects go far beyond simple numbers. From supply chain disruptions and inflationary pressures at home to geopolitical recalibrations abroad, these decisions are rewriting the rules of engagement.

What remains to be seen is whether this high-stakes, multi-front negotiation strategy will lead to more balanced trade relationships—or trigger unintended consequences that strain diplomatic ties and destabilize markets. The coming months will test the resilience of international trade systems, the adaptability of domestic economies, and the foresight of policymakers across the globe.

As history has shown, trade is not just about goods—it’s about leverage, trust, and influence. And right now, we are watching how the U.S. plays its next move.

Appendix

Data Collection

Glossary

  • (M) Imports: All commodities entering a country, regardless of their intended use.

  • (X) Exports: All commodities leaving a country, regardless of their origin.

  • (DX) Domestic Export: Exports of goods that were produced or substantially transformed within the country.

  • (RX) Re-Export: Export of goods that were previously imported and resold without significant transformation.

  • (FM) Foreign Import: Goods imported specifically for local consumption.

  • (RM) Re-Import: Goods that were originally produced domestically, exported abroad, and then re-imported without undergoing significant changes.

  • Trade Equation Notes:

    • Imports = Foreign Import + Re-Import

    • Exports = Domestic Export + Re-Export

    • Trade Deficit = Total Exports − Total Imports

Thanks for reading! I hope this deep dive into the evolving trade dynamics helped clarify some of the complexities behind the headlines. If you have thoughts, counterpoints, or just want to continue the conversation, feel free to reach out to me.

Always happy to hear from you!