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As President Donald Trump embarks on his second term, his trade policy continues to shape global economic discussions. As he initiates his foray of tariffs on not just China but also Canada and Mexico, he declares even more tariffs that counter reciprocal tariffs . Countries that are considered to be closer to Washington are also gearing up to face off US tariffs, i.e., India and the European Union. This article strives to provide an overview of Trump’s “ protectionist” conviction and what drives it, and how it is affecting US relations worldwide, especially in the American camp. Why does it matter? Because in the world of today, the economy is intrinsically linked with security, and concomitant with the interplay of foreign relations, tariffs can or maybe are reshaping the global order we live in today.
Trump’s reciprocal tariff system risks fragmenting global supply chains and inflaming trade tensions even among traditional U.S. allies.
President Trump has made it clear, that his “ protectionist” method will become the capstone of his foreign economic dealings, tariffs being the mainstay arsenal as of now . Be it tariffs on Denmark as retaliation for rejecting Trump’s proposal to buy Greenland. Or trade restrictions on Mexico tied to immigration policies or his proposed tariffs on Colombia despite an existing free trade agreement, highlighting unpredictability in U.S. trade strategy.
One of Trump’s newest proposals is a reciprocal tariff system, where U.S. tariffs would match those imposed by trading partners on a country-by-country, product-by-product basis. Implementing a reciprocal tariff system would involve managing over 13,000 tariff categories across trade with approximately 200 countries, potentially resulting in 2.6 million individual tariff rates.
A bird eye’s view of similar practices elsewhere show that is can Increase fraud risks, as companies may mislabel products or reroute shipments through third countries to avoid tariffs. Abrupt tariff regimes weaken supply chain predictability, making it harder for businesses to plan long-term investments. To cite an example, the state of Querétaro in Mexico, which has seen significant economic growth due to foreign investments, faces uncertainty due to the US’s protectionist tariff measures, including the proposed 25% import tax.
Trump has frequently referenced President William McKinley, arguing that high tariffs fuelled American economic growth in the late 19th century. However, it is to be noted that McKinley’s stance evolved—while he initially pushed for high tariffs as a Congressman, as President he advocated for reciprocity and global market access. This shift in McKinley’s thinking contrasts with Trump’s protectionist approach, which emphasizes tariffs as a tool for economic leverage rather than mutual market liberalization.
Trump’s push for higher tariffs on key industries, including steel and aluminium, has raised concerns about inflation, supply chain disruptions, and economic retaliation. In February 2025, President Donald Trump imposed a 25% tariff on all steel and aluminium imports into the United States, without exceptions or exemptions. Studies indicate that: tariffs increase consumer prices, disproportionately affecting lower-income households, Industries reliant on imported inputs (e.g., automotive and manufacturing) suffer from higher costs, reducing competitiveness and lastly, tariffs do not necessarily lead to reshoring, as global supply chains remain deeply integrated.
The dismantling of WTO mechanisms signals a shift from rule-based trade to raw power-driven economic diplomacy.
Trump’s tariff threats extend to European allies, that can have the potential of straining transatlantic relations, particularly in the following contexts. U.S. scepticism towards NATO spending, potentially leading to reduced American military support. European fears of a fragmented trade approach, as Trump attempts to negotiate with individual countries rather than the EU as a bloc. Ongoing U.S.-Russia negotiations that could reshape economic dynamics, particularly regarding energy and security policies
With rising concerns over U.S. economic unpredictability, some policymakers are pushing for the Euro to gain greater prominence as a global reserve currency. The EU’s growing issuance of debt, particularly to finance defense, could make the Euro more attractive as a safe asset for international investors. However, Europe faces hurdles, including slower economic growth and structural limitations in debt issuance.
The EU’s Anti-Coercion Instrument, initially designed to counter Chinese economic tactics, could be used against the U.S. European tariffs could target American industries strategically, much like the first Trump-era trade war, which hit U.S. bourbon, Harley-Davidsons, and blue jeans. The European Union has announced plans to retaliate against these US tariffs, deeming them “unlawful and economically counterproductive.”
Regulatory tools, such as new restrictions on U.S. tech companies, could also be deployed as leverage. While the goal of U.S. tariffs is unclear, they could be used as coercive leverage to push European allies on unrelated policy areas, such as increasing NATO defence spending. However, trade experts argue that tariffs would be economically damaging to both sides, increasing costs for consumers and disrupting supply chains.
Germany is making an unprecedented fiscal move by relaxing its “debt brake” to allow increased defense spending above 1% of GDP and allocating a €500 billion special fund for infrastructure projects. This shift, driven by concerns over European security post-Ukraine invasion, signals Germany’s readiness to step up militarily and economically. The move is controversial, with debates on its constitutionality and the challenge of securing a two-thirds majority before the March 25 Bundestag deadline. The Greens and SPD are in negotiations, with the CDU expected to push back despite acknowledging Germany’s need for increased investment.
The erosion of the World Trade Organization (WTO) constitutes an existential threat to the integrity of the rules-based international trading order, particularly for economies vulnerable to exogenous macroeconomic shocks. The Trump administration’s deliberate obstruction of WTO dispute resolution mechanisms marks a paradigmatic shift away from institutionalized arbitration toward a form of “economic Darwinism”—where sheer market dominance supplants negotiated multilateral norms.
This departure from cooperative engagement portends a fragmented trade landscape, one where hegemonic leverage eclipses legal predictability. Yet, paradoxically, recent U.S. nominations for WTO leadership positions hint at a selective, albeit strategic, reintegration into the multilateral fold. Whether this signals a genuine recalibration or a mere tactical manoeuvre remains an open question, underscoring the broader uncertainty surrounding the future of global trade governance.
Trump’s decision to cut aid programs in Africa, particularly in South Africa, has raised concerns across the continent. As the U.S. retracts its developmental footprint, strategic competitors such as China and Russia are deftly manoeuvring to fill the void, deepening both economic entanglements and military entrenchments in pivotal regions like the Sahel, the Red Sea corridor, and Central Africa. This realignment is not merely a redistribution of economic partnerships but a reconfiguration of influence, where conditional Western aid models are increasingly supplanted by Beijing’s infrastructure-heavy investments and Moscow’s security-oriented engagements.
As U.S. retreats from global aid and trade norms, rivals like China and Russia are filling strategic vacuums in key regions.
The imperative to diversify strategic alignments has never been more pressing for African nations historically tethered to U.S. development assistance. Trump’s trade policies represent a fundamental rupture with multilateral orthodoxy, replacing long-standing principles of reciprocity and predictability with an erratic, transactional ethos. While certain domestic industries may momentarily benefit from protectionist buffers, the broader economic ramifications—escalating input costs, heightened market volatility, and the erosion of trade alliances—carry systemic risks.
This shift raises a pivotal dilemma: Does economic sovereignty, as envisioned through unilateralist protectionism, ultimately fortify national resilience, or does it engender strategic isolation? As global markets recalibrate to this new reality, the United States faces a defining moment—will it emerge as an unassailable economic bastion or an increasingly insular actor, outmanoeuvred by more agile, cooperative competitors? The trajectory of this experiment in economic nationalism will shape the contours of global commerce for years to come.
Hammad Waleed is a Research Associate at the Strategic Vision Institute, Pakistan.
