Global economy tariffs are rewriting the rules of trade – yet growth rolls on

A quick snapshot

• World GDP grew 2.4% in the first half of 2025 despite record-high tariffs.
• Merchandise trade volume jumped 5.3% year-on-year in Q1 2025 as companies raced to ship goods before new levies hit.
• IMF’s baseline still pegs 2025 growth at 3.3%, only slightly below pre-tariff trends.

How the global economy tariffs wave began

The current tariff cycle traces back to 2018, when the United States and China exchanged duties on steel, aluminum, and other goods. Since then, major economies have raised import taxes, launched retaliatory tariffs, or threatened to do so. The turning point came in May 2024, when the U.S. imposed a 100% tariff on Chinese electric vehicles and critical minerals. Europe followed later that year, placing duties of up to 45.3% on Chinese-built EVs. In April 2025, the U.S. introduced a broader tariff policy targeting countries such as Vietnam and Brazil.

A burst of volatility and a 90-day reprieve

Tariff headlines now shift week to week. On May 12, 2025, the U.S. and China agreed to a temporary 10% tariff ceiling on many goods, giving negotiators a 90-day window. This led to a sharp increase in orders as importers rushed to ship products ahead of deadlines. The resulting bump in trade activity gave Q1 numbers a temporary lift.

Why growth refuses to break

1. Stockpiling and hedging. Many companies built up inventory to avoid future tariff costs, cushioning price shocks for consumers.
2. Supply chain rewiring. Businesses restructured production lines, favoring lower-tariff hubs in places like Mexico, Poland, and Southeast Asia.
3. Services to the rescue. Digital trade has surged in value, helping offset some of the decline in goods-based trade.

Despite warnings that trade growth could dip to 1.7% in 2025, global trade still expanded by around $300 billion in the first half of the year.

Company playbook: adapting to global economy tariffs

American Outdoor Brands, for example, explored relocating manufacturing to Vietnam and Indonesia but paused amid ongoing tariff negotiations. Across industries, companies are using similar strategies:

• Multi-origin sourcing to meet complex origin requirements.
• Tariff engineering by reclassifying products into lower-tax categories.
• Free-trade-zone processing in major ports to delay or reduce tariffs.
• Digital modeling tools to simulate tariff impacts and adjust strategies quickly.

Regional winners and strugglers

Trade deals that blunt the pain

Agreements like the United States-Mexico-Canada Agreement (USMCA), the Regional Comprehensive Economic Partnership (RCEP), and the EU-Australia pact offer companies ways to reduce tariff exposure. On average, firms using these deals can save around 10% on tariff-related costs, often enough to offset new duties.

Digital trade: the silent shock absorber

Digital services—like software, cloud computing, and online consulting—face few border restrictions. As physical goods face tariffs, the global shift toward digital services is accelerating. Countries with strong digital infrastructure, such as India, Ireland, and Singapore, are benefiting the most.

The fine print: risks piling ahead

• Tariff fatigue. Companies may run through early-2025 stockpiles, leading to a slowdown in late 2025.
• Retaliation chains. New duties on steel from Mexico and Canada threaten long-standing trade routes.
• Compliance complexity. Stricter rules on trans-shipment make it harder to avoid tariffs, especially in regions like Southeast Asia.

Policy priorities for a tariff-heavy world

1. Simplify origin rules so small businesses can benefit from trade agreements.
2. Digitize customs processes to cut delays and hidden fees.
3. Expand international agreements on digital services to stabilize trade revenue.
4. Provide targeted relief for countries heavily impacted by food and medicine tariffs.
5. Introduce clear and transparent tariff schedules to reduce uncertainty.

Outlook: cautious resilience

Analysts expect global GDP to ease to 2.9% in 2026 if trade tensions persist. However, few forecast a full-blown recession. History shows that tariffs usually shift demand rather than destroy it. Supply chains adapt, businesses find workarounds, and digital markets continue to grow. Innovation often thrives in times of disruption, especially in areas not directly affected by tariffs.

Conclusion

The world is experiencing the highest level of tariffs since the 1930s. But the feared collapse in global trade hasn’t materialized. Global economy tariffs have certainly created challenges, yet businesses and governments are responding with innovation and flexibility. From rerouting supply chains to expanding digital services, the global economy is proving it can adapt—even under pressure. The next challenge is whether this momentum can continue as early stockpiles shrink and new duties kick in. For now, though, the message is clear: trade is being tested, but it’s still holding strong.

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