How Trump’s trade war has upended the global economy
Since his return to the White House in 2025, President Donald Trump’s policies have reshaped international trade, influenced market dynamics, and altered economic relationships worldwide.
According to an analysis by the American Institute for Economic Research, the S&P 500 lost approximately $4.7 trillion in market value due to tariff-related announcements.
The “Magnificent Seven” tech giants were hit particularly hard, losing $2 trillion in value.
According to JPMorgan Research, global GDP could decline by up to 1 per cent due to reduced trade and investment. Business sentiment and consumer confidence have weakened, contributing to market uncertainty. The risk of a global recession rose to 40 per cent at one point in early 2025.
One of the most notable aspects of Trump’s economic policy has been his aggressive use of tariffs. In his first term, Trump imposed tariffs on a wide range of Chinese goods, aiming to reduce the trade deficit and encourage domestic manufacturing. This approach has continued into his second term, with new tariffs on copper and pharmaceuticals. These measures have led to increased prices for these commodities, affecting industries and consumers globally.
A significant impact of Trump’s policies has been loss of confidence in the entire post-World War economic system as was created at the Bretton Woods conference in 1944, designed to promote global economic stability and cooperation. A key feature was the establishment of the US dollar as the world’s reserve currency. With Trump’s policies, global investor confidence in the greenback is dwindling, having a wide impact across sectors. As of early July 2025, the US dollar has declined by over 10 per cent year-to-date, marking its worst start to a year since 1973.
The tariffs have also strained relationships with key trading partners. Countries like China and the European Union have retaliated with their own tariffs, leading to a tit-for-tat trade war that has disrupted global supply chains. The uncertainty created by these trade disputes has led to market volatility and has forced companies to rethink their international strategies.
Trump’s policies have had a mixed impact on global markets. On one hand, the tariffs have hurt industries that rely on imported materials, leading to higher costs and reduced profitability. On the other hand, sectors that benefit from protectionist measures, such as domestic manufacturing and energy, have seen a boost.
The global stock markets have reacted to these changes with increased volatility. While the U.S. markets initially benefited from tax cuts and deregulation, the ongoing trade wars have created uncertainty, leading to fluctuations in stock prices. European markets, in particular, have experienced a resurgence as investors seek stability outside the US.
Economic nationalism and deregulation
Trump’s economic nationalism has been a cornerstone of his policy agenda. By promoting a “Made in the USA” approach, he has encouraged companies to relocate their operations to the United States. This has been supported by tax incentives and deregulation efforts aimed at reducing the burden on businesses.
However, this inward-looking approach has had global repercussions. Countries that have traditionally relied on the US as a major market for their goods have had to adapt to the new reality. This has led to shifts in global trade patterns, with some countries seeking new markets and alliances to offset the loss of US demand.
Effects on developing economies
Developing economies have been particularly affected by Trump’s policies. The imposition of tariffs and the resulting trade wars have disrupted supply chains, leading to economic instability in countries that rely on exports to the US. Additionally, the focus on deregulation and tax cuts in the U.S. has made it more challenging for developing countries to compete, as they struggle to attract investment and maintain economic growth.