Trade retaliation rises as Trump-era tariffs shape global supply chains

Global trade faces increased retaliation and shifting supply chains in the second half of 2025, as Trump-era tariffs continue to impact economies and trade policies worldwide.

Global trade in the first quarter of 2025 surged significantly, with a potential rise of up to $300 billion during the first half of the year, according to the Global Trade Update report published by the UN Conference on Trade and Development (UNCTAD). 

The report indicates that merchandise trade grew by 1.5%, and service trade expanded by 1.7% in the first quarter of 2025, while the second quarter is expected to see growth of approximately 2%.

However, the outlook for the second half of 2025 remains uncertain. The resilience of global trade will largely depend on the clarity of trade policies, the development of regional economies, and the ability of supply chains to adapt. 

On the other hand, economic growth is forecast to slow in many regions, suggesting that international trade may experience a slowdown.

Rising tariffs, particularly in the United States, and the risks of broader trade conflicts are significant negative factors. Additionally, the latest Purchasing Managers' Index (PMI) from China signals a downturn in manufacturing activity, which may lead to decreased import demand and weaker export orders. Nevertheless, growing regional integration may provide some support to global trade, with key indicators such as the Shanghai Containerised Freight Index and the Baltic Dry Index showing recovery from their early 2025 lows, though still below the 2024 averages.

The primary factors contributing to the increasing uncertainty in global trade for the second half of 2025 include:

Uncertainty surrounding US trade policies, with new tariffs affecting multiple countries and specific products, such as the automotive sector.

The potential for retaliatory measures, as the US continues to implement unilateral trade actions, which could escalate tensions and impact third-party countries not directly involved in disputes.

Growing domestic industrial policies and subsidies aimed at boosting local industries, which could affect international trade, especially in strategic and advanced technology sectors.

The cascading effects of trade measures targeting specific segments of global value chains may disrupt entire supply networks due to the deeply integrated nature of current manufacturing systems.Meanwhile, the Trade Monitoring Update report from the World Trade Organisation (WTO) highlights a rapid increase in new tariffs and their share of global trade from October 2024 to May 2025, which has led to a volatile and unpredictable global trade landscape.

Despite ongoing trade policy uncertainty, geopolitical tensions, and regional conflicts, the WTO continues to witness increased participation in efforts to find solutions through negotiations aimed at resolving trade-related differences.

The WTO's Annual Trade Monitoring Report, published on July 3, 2025, provides an overview of global trade and policy developments. The report highlights the impact of rapidly rising tariffs over just six months, with global import tariffs increasing by 12.5%. This has led to the creation of new trade measures, which are expected to rise by 19.4% since 2009.

"We are seeing positive signals of negotiations aimed at finding mutually beneficial solutions," said Ngozi Okonjo-Iweala, Director-General of the WTO. "We urge WTO members to continue collaborating to reduce tensions, promote WTO-consistent approaches, and most importantly, address the underlying issues through comprehensive WTO reforms."

The report also reveals that the value of global merchandise trade subject to new tariffs and other measures enforced during the seven-month review period has reached $2.732 trillion, more than three times the $887.6 billion recorded in the previous 12 months (2024). This represents the highest level of new trade measures recorded since the WTO began tracking trade policy developments in 2009, with the United States citing national security and economic emergencies to justify its trade actions since early 2025.

Globally, 644 trade measures were implemented, including 296 anti-dumping measures, which account for 46% of all trade measures applied, the highest share in over a decade. Additionally, 141 other trade-related measures were recorded, including tariff hikes and export restrictions.

Despite the challenging global trade environment, many sectors have implemented measures such as subsidies, economic stimulus programs, state assistance, and export incentives to tackle increasing trade barriers. However, the use of direct support measures is expected to decline, replaced by regulatory tools focused on broader economic objectives. These measures will likely shift towards justifications such as climate change mitigation, supply chain security, and national security concerns.

(2025/07/15-00:00)