US President Donald Trump unveils a board displaying the reciprocal tariffs his executive order will impose on other nations in Washington, DC, 3 April 2025. Andrew Leyden/NurPhoto

US President Donald Trump’s second term has been characterised by the imposition of tariffs worldwide and by urgent dealmaking. Global Insight examines how trade has changed.

Ten days after US President Donald Trump met with his South Korean counterpart Lee Jae Myung to cement a new ‘trade deal’, American immigration enforcement officers raided a Hyundai factory in the state of Georgia. More than 300 South Korean workers were arrested in the September raid, with US officials saying many had violated the terms of their visas.

The incident sparked a backlash in Seoul. President Lee called it an ‘unjust infringement’ that must never recur. Korean lawmakers questioned the trade deal. A Hyundai spokesperson said meanwhile that the company was ‘closely monitoring the situation and working to understand the specific circumstances’. As of 5 September, it was the company’s understanding ‘that none of those detained is directly employed by Hyundai Motor Company’.

South Korea had just succeeded in reducing President Trump’s tariffs on Korean vehicle exports – which were initially threatened at a rate of 25 per cent – to 15 per cent. In exchange, Seoul promised to invest $350bn in US industry. Now it appeared there were more strings attached. ‘Your investments are welcome, and we encourage you to LEGALLY bring your very smart people, with great technical talent, to build World Class products, and we will make it quickly and legally possible for you to do so,’ Trump said in a social media post. ‘What we ask in return is that you hire and train American Workers.’

The incident highlights some uncomfortable truths about President Trump’s tariff and trade policies, which are reversing 75 years of American leadership on free trade. Using arbitrary and unilateral tariff threats, Trump is throwing the rules-based order – which underpins more than $24tn in annual goods trade worldwide – into turmoil. US trading partners and longtime allies are being forced to offer tribute or suffer harsh economic consequences.

‘It’s chaotic,’ says Raj Bhala, an officer of the IBA International Trade and Customs Law Committee. ‘Normally, we think of US trade policy unfolding after a careful deliberative process in the White House, the Commerce Department and the US Trade Representative’s office. Now, at any moment in a 24-hour day we can be alerted by a social media posting from the president that announces a dramatic new development.’

‘Deals that are announced as complete are not at all complete,’ adds Bhala, who’s a University Distinguished Professor of international trade law at the University of Kansas School of Law. ‘It’s a transactional approach that has serious, deleterious consequences for the system.’ The US has, according to Bhala, repeatedly violated treaty rules and the most-favoured-nation principle.

The President and his administration officials argue that the tariffs are about making trade fair, and that they’ll boost American manufacturing and create jobs. But they appear to be more about creating leverage for the US to then negotiate concessions with other countries. As the EU, Japan, South Korea and others are finding out, President Trump’s ‘deals’ – which are never committed to binding text – only hold until there’s a new demand. Even those agreements are undercut by separate, punitive tariffs Trump is imposing on sectors such as steel, aluminium and copper.

Meanwhile, the US Supreme Court is reviewing rulings by lower courts that Trump abused his presidential authority by claiming emergency powers to levy across-the-board tariffs. A ruling by America’s highest court, expected to strike down many but not all of President Trump’s tariffs, could come by the end of 2025. Even then, the US President has other authorities he can tap to keep tariff threats coming.

The new world order

All of it adds up to uncertainty, higher costs worldwide and a new paradigm for global trade. President Trump has begun a global shakeout that’s both challenging the old order and, for some, creating new opportunities.

‘I don’t necessarily like how he’s going about it, but in a sense what Trump is doing is a change for the better,’ says Yves Melin, Co-Chair of the IBA International Trade and Customs Law Committee. ‘He kicked the ant hill. And now things are changing.’ Melin adds that it’s unclear where things will land. ‘But those reciprocal duties are just a way to create leverage,’ he says. ‘The devil will be in the details, and we’ll need to watch the impact they have in practice.’

What’s driving President Trump’s policy is his long-held belief that tariffs are good both for the US economy and its government’s treasury. The approach has considerable support domestically because of the hollowing out of blue-collar jobs – such as manual labour and technical work – within developed nations over the last 50 years, says Melin, who’s also a partner at law firm Cassidy Levy Kent in Brussels.

‘The World Trade Organization has been broken for a long while, simply because we are in there with very different countries, with autocratic countries like China where [for example] you cannot strike,’ says Melin. ‘And they have the same rights as the US has to bring their goods into the EU, or the EU has to bring its goods in the US. The result of that has been massive de-industrialisation of both the US and the EU which is eating away at the middle class.’

Beginning in April, President Trump imposed a minimum ten per cent baseline tariff on the value of all imports to the US from every country, with some exceptions. The President has since raised that baseline to 15–20 per cent for many countries. Some, such as Iraq, South Africa and Switzerland, face even higher across-the-board tariffs. President Trump has reserved some of his harshest threatened tariffs – in excess of 50 per cent – for China and India, where negotiations are ongoing. So called trade ‘deals’ – more accurately described as non-binding agreements in principle – have been reached with the EU, Indonesia, Japan, Pakistan, the Philippines, South Korea, the UK and Vietnam.

Creon Butler, Director of the Global Economy and Finance Programme at think tank Chatham House, said in a June blog post that President Trump had delivered ‘the largest shock to the rules-based international trading system since its emergence in the aftermath of the Second World War’. US average tariffs have been raised from 2.5 per cent before to 17.8 per cent now, according to a study by the Yale University Budget Lab. That’s the highest level since the 1930s when the US adopted the protectionist Smoot-Hawley tariffs, which contributed to the economic downturn known as the Great Depression.

Urgent dealmaking

Of course, average tariff numbers mask what’s going on beneath the surface as rates are reduced for some imports and raised sharply for others. Trump administration officials have urgently sought to reach agreements with major US trading partners in part to avoid negative economic consequences after the country’s stocks fell in April upon the President’s first announcement.

In September, President Trump appeared to sweeten the pot for the EU, Japan, South Korea, the UK and others with US agreements in place by issuing an order shielding a wide range of more than 40 industrial products from his announced reciprocal tariffs. The effect has been to create a country-by-country patchwork of import taxes, non-tariff arrangements and potential future threats.

The first nation to reach a deal on tariffs with Trump was the UK. The agreement – formally titled the ‘US-UK Economic Prosperity Deal’ – was jointly announced in May by President Trump and UK Prime Minister Sir Keir Starmer. US beef and ethanol exports gained greater access to UK markets while Trump agreed to hold American tariffs on most UK exports at ten per cent. A 100,000-car quota was imposed on UK-made vehicles, with any additional cars subject to a 27.5 per cent tariff.

The White House called the agreement a ‘great deal for America’ while the UK government claimed it would save ‘thousands of jobs’. For UK businesses now subject to the ten per cent tariff, however, implementation has still proven complex and fraught because of continuing political risk.

Meanwhile, the agreement reached by the EU with President Trump in July has been received as lopsided in favour of the US. European Commission President Ursula von der Leyen cut the deal in a meeting with Trump at his Turnberry golf club in Scotland. President Trump agreed to set a 15 per cent tariff ceiling on all goods coming into the US from EU Member States. Von der Leyen agreed to seek an elimination of already low duties on US industrial products and enable better access to European markets for American agriculture and fish. She also promised to deliver $750bn in purchases of American energy and invest $600bn in creating new jobs in the US.

‘The EU and Germany reacted to the tariffs imposed by Trump not with confrontation, but rather looking to find a deal where we could still work with the US,’ says Leonard von Rummel, an officer of the IBA International Trade and Customs Law Committee. ‘There’s a recognition that it’s not rules-based anymore. It’s taming the tiger, so to say.’

Von Rummel, who’s a partner at law firm Blomstein in Berlin, says the hope was for a flat tariff rate of 15 per cent or possibly lower, especially for the vehicle manufacturing sector. ‘The wish was to find a pragmatic approach and to be defensive about how to deal with Trump,’ he explains. However, von Rummel isn’t sure if the approach has worked. ‘Everyone is a bit uneasy and not sure how it will go further down the line,’ he says.

Opposition from EU Member States at a governmental level, as well as from both national and European Parliament legislators – and from some businesses in the bloc – will make implementation difficult. Worse, in September the European Commission fined Google $3.5bn for breaching the bloc’s antitrust rules. This has prompted President Trump to threaten new retaliatory tariffs, effectively intertwining Big Tech regulation with trade policy. Climate and carbon regulation is meanwhile subject to ongoing discussion, but the differences between the two sides in this area remain problematic.

Brazilian trials and Indian exporters

In July, Trump posted on his social media platform Truth Social that he was imposing a 50 per cent tariff on US imports from Brazil because of the latter’s judicial prosecution of its former president, Jair Bolsonaro, who’s a political ally of the US President. Trump called the trial a ‘Witch Hunt’ and an ‘international disgrace’.

Brazil’s President Lula da Silva rejected what he called ‘blackmail’ and denied the trial was a ‘witch hunt’. He said his country ‘will not accept any form of tutelage’. At the trial in September, Bolsonaro was found guilty by a majority of judges of all five charges against him, which included attempting to stage a coup following Brazil’s election in 2022. His lawyers have said they’ll appeal the judgment.

President Trump’s claim justifying the tariff hike – that the US was being hurt by trade with Brazil – was met with scepticism. The US runs a trade surplus with Brazil. In August, Brazil initiated a case against the US at the WTO and Lula warned that unilateral tariffs would be met with retaliatory measures. ‘Brazil continues to support the multilateral system, as evidenced by its formal request for consultations at the WTO, against the measures imposed by the US,’ says Carol Monteiro de Carvalho, Member of the IBA International Trade and Customs Law Committee Advisory Board.

Brazil’s government is now recruiting American clients to help it lobby for relief from Trump’s tariffs while at the same time seeking alignment with other trading partners in search of market diversification, according to Monteiro de Carvalho, who’s a partner at law firm Monteiro & Weiss in Rio de Janeiro. ‘Brazil will follow its own path,’ with trade defence defined by its economic security and industrial policy, she says.

In August, meanwhile, President Trump announced he was raising US tariffs on products from India by an additional 25 per cent. The President cited India’s purchases of Russian oil and its trade surplus with the US as rationale, with the increase coming on top of the 25 per cent tariff already announced. Trump has called the trade relationship between the two countries ‘a totally one sided disaster,’ while India’s foreign ministry said the tariff increase was ‘unfair, unjustified and unreasonable’.

The US imports about $87.3bn in goods annually from India. Meanwhile, India buys less than half that amount from the US. Trump’s punitive tariffs – if they’re sustained – could cut India’s exports to the US by a third, with the loss of hundreds of thousands of jobs.

President Trump’s initial round of reciprocal tariffs on India had exempted pharmaceuticals, electronics and energy, which spared US consumers from price shocks. But textiles, jewellery and vehicle parts were still affected. The Indian Prime Minister, Narendra Modi, took steps to cushion the shock for Indian exporters.

‘The one thing that is clear is every other country in the world is today unhappy with the US,’ says Seetharaman Sampath, co-founder of Sarvada Legal, an international trade practice in New Delhi. ‘Whether you put the tariffs at 19 per cent, 24 per cent, 50 per cent, it doesn’t matter. There is no uniformity, and it looks like it is at the whims and fancies of the US government.’

Critics in the US are worried that the trade dispute could push India away as Washington seeks to build an alliance with New Delhi as a strategic partner to counter China’s rising power in the Pacific. Those fears worsened after Modi appeared in Beijing at a gathering in September with China’s President Xi Jinping, Russian President Vladimir Putin and other leaders aligned with the BRICS nations. President Trump soon posted on social media that trade negotiations between the US and India were continuing. ‘I feel certain that there will be no difficulty in coming to a successful conclusion for both of our Great Countries!’ Trump said.

Part of the problem for the US in sustaining the 50 per cent tariffs on India will be higher costs for vehicle parts, Sampath says. ‘They are still exporting to the US, because in the auto component industry, approval by the original equipment manufacturers is a long, drawn-out process,’ Sampath says. ‘So, even if you impose a duty today, to get a new vendor will take at least two years of rigorous testing and approval. Until then you have to survive with the existing players, and the cost of the manufacture will go up.’

As Trump’s protectionist tariffs on aluminium and steel apply to other countries as well, the prospect of shifting to other suppliers is further complicated. Sampath believes the costs will probably be passed through to US consumers instead.

Unsettled trade relationships

Two countries with perhaps the most to lose from a trade war with the US are Mexico and Canada. Since 1994, the three countries have had a free trade agreement (originally NAFTA, now the USMCA) in place, one that provides for duty-free exchange of goods and streamlined customs at ports of entry. As a result, about 85 per cent of Mexican and Canadian exports to the US are exempt from the 25 per cent tariffs that Trump announced earlier in 2025.

But how Canada and Mexico have fared under President Trump’s trade gamesmanship is a study in divergence and schism. Trump has given Mexico a 90-day reprieve from punitive tariffs through October, while imposing a 35 per cent tariff on Canadian steel and aluminium products that fall outside the USMCA.

Mexico, under the leadership of President Claudia Sheinbaum, has avoided threatening retaliation and instead sought to work with the Trump administration on drug cartels and migration. It has agreed to address a long list of non-tariff barriers compiled by the US Trade Representative. And the Mexican government had proposed 50 per cent tariffs on Chinese vehicles, aligning itself with Washington.

With the USMCA coming up for renegotiation in 2026, there will be an intensifying focus on product origin and customs audits, says Emilio Arteaga, an officer of the IBA International Trade and Customs Law Committee. Going forward, he predicts that trade relations with the US will be marked by ‘constant negotiations, constant threat, and constant uncertainty’.

In contrast, the polarising rhetoric President Trump directed at Canada early in his second presidency – for example, his suggestion that the country might become a US state – narrowed the Canadian government’s options. Back in February, Trump cited a ‘sustained influx of illegal aliens’ and the smuggling of drugs, particularly fentanyl, as the rationale behind his imposition of punitive tariffs on Canada, as well as on China and Mexico. The Canadian government has introduced several measures to enhance border security and to detect and intercept fentanyl and other illegal drugs, while noting that ‘Canada is a very small source of fentanyl coming into the United States’.

The country has since removed most of its 25 per cent retaliatory tariffs on the US, but kept levies on American steel, aluminium and vehicles. Canadians are boycotting US consumer products, and their leaders are pivoting toward Europe.

‘There is going to be a new relationship. That relationship is going to be principally interest-driven rather than principle-driven,’ says Rambod Behboodi, senior counsel at Canadian law firm Borden Ladner Gervais in Ottawa. ‘There’s a realisation in Ottawa that some of those sectoral tariffs basically are not going to go away. So how to minimise the impact on Canada is an issue.’

The way President Trump has conducted trade talks, the shifting goal posts and his demands for major foreign investments in the US in exchange for lowering unilateral tariffs have damaged US credibility, in Behboodi’s view. ‘We’re seeing that even though other countries have had deals, those deals haven’t stuck, or the announced terms are different from what appear to have been agreed, or there’s disagreement on what appears to have been the deal. You can name the deal, and there are issues with it. We still don’t have agreed text on anything,’ he says. ‘You can agree, as the EU did, to a deal that is heavily lopsided, come back home, announce the agreement, and then the next day there is a social media post that says, “We have other demands”.’

The biggest unsettled trade relationship is between the US and China. In 2024, the US imported about $439bn in goods from China and exported about $143bn in return, according to US government data. President Trump initially announced a 34 per cent tariff on almost all Chinese imports but that was reduced to ten per cent under a ‘truce’ after China restricted the export of rare earths to the US, which had threatened to shut down major American vehicle manufacturing plants. Additional punitive and protectionist tariffs of 20 to 50 per cent remain in place on a variety of commodities under US Section 301 and Section 232 trade laws.

President Trump imposed tariffs on China primarily to address what his administration considers unfair trade practices that have harmed the US economy, allegations Beijing rejects. He cited China’s record of industry subsidies, for example. China’s President Xi has taken a hard line with Trump and appears to have more leverage in any negotiations than other US trading partners. ‘The mentality of the United States […] is that the US should hold a position superior to all others,’ says Zhao Hong, a professor of law at Peking University Law School in Beijing and a former WTO appellate body official. ‘That’s very upsetting to all others and a surprise. We were previously taught every nation – big or small – is equal. It’s in the charter of the United Nations. So, we have to take time to recognise that the world is upside down.’

Indeed, the new trade environment wrought by President Trump’s imposition of unilateral tariffs is a reversal of the multilateral, rules-based regime the US had championed for decades.

A new trade order is now being built on power politics and leverage. It’s leading to a fragmentation of old patterns of commerce as governments follow the US in adopting national strategies to reshore and protect industries – not only through tariffs, but via trade defence measures, subsidies and national security policies. As policy thinking shifts in other countries, new regional trade architecture is emerging as nations develop alliances based on shared values. Increasingly, such groupings don’t include the US.

‘Geopolitics are dominating. It’s distracting away from what used to be a rules-based trading system. It’s bad news for business,’ says Charles Zhan, an officer of the IBA International Trade and Customs Law Committee. ‘We used to advise making business decisions based on the commercial reality and what the law is. Now you need to consider a lot of other issues that, frankly, are not in anyone’s control.’

Zhan, who’s a partner at Moulis Legal in Canberra, highlights that President Trump can quickly change his mind, as he has demonstrated on several occasions. ‘This undermines confidence and more importantly undermines the integrity of the rule of law,’ he says. ‘It raises significant questions as to the existence and future of the rules-based system.’

William Roberts is a US-based freelance journalist and can be contacted at wroberts3@me.com