USA Trade War: who really pays the price?

Since the eruption of the new US trade war in spring 2025, the world of international business has been navigating unprecedented turbulence. The ripple effects of this US versus the world trade conflict are felt across continents, disrupting established balances. As tariffs soar to historic heights, companies engaged in global trade are forced to confront a new economic reality marked by uncertainty and instability.

The mechanics of the US Trade War: tariff escalation

Former US President Ronald Reagan, often cited as a Republican icon, had already warned against the perils of protectionism. In an April 1987 speech, he cautioned:

"At first, imposing tariffs seems patriotic, protecting American products and jobs. It might work briefly, but high tariffs inevitably lead to retaliation and the outbreak of trade wars. […] Soon, artificially high prices make people stop buying. Then the worst happens: markets collapse, industries close, and millions of people lose their jobs."

Despite this historical warning, what began as a series of targeted protectionist measures quickly escalated into a full-blown global trade battle. As we write this, tariff escalation has reached unprecedented levels:

• 125% on Chinese products — a near-prohibitive level making trade almost impossible.
• 20% on European products — particularly impacting industrial and automotive sectors.
• Tariffs ranging from 10% to 60% on products from numerous other countries.

This sudden and widespread increase is disrupting global supply chains. Businesses that built their economic models on the fluidity of international trade are now facing a drastically different business environment.

The initial impacts on the global economy

The consequences are already being felt across the global economy. The impact of the US versus the world trade war is manifesting in several ways:

Free-falling financial markets

In the first two days following Donald Trump's "Liberation Day" announcement, the world's 500 wealthiest individuals collectively lost $536 billion. European stock markets plummeted, with declines of over 3% in Paris, Milan, and Frankfurt. This volatility is likely just the beginning of a prolonged period of instability.

Disorganized supply chains

Businesses that rely on imported goods are seeing their production costs skyrocket, threatening their competitiveness in global markets. Certain industries are particularly vulnerable:

• Automotive industry: dependent on parts from multiple countries, it faces a significant increase in costs.
• Electronics: the United States relies on China for 73% of its smartphones, 78% of its laptops, and 87% of its video game consoles.
• Textiles and consumer goods: sectors heavily impacted by tariffs on Asian products.

A risk of global recession

Economists are concerned about the medium-term effects of this US trade war and fear various scenarios:

• Slowdown in global economic growth.
• Generalized price increases for consumers.
• Disruption of international investments.
• Increased risk of recession in several major economies.

The impact of the US versus the world trade war could be long-lasting, according to Christian Deblock, professor emeritus at the University of Quebec in Montreal: "The world is perceived as a battle arena and no longer a space for cooperation."

Who are the real losers?

Data shows that the impact of the US trade war is creating losers across all economic sectors:

Exporting companies

Companies whose economic model relies on exports are on the front lines of the US trade war. For Europe, whose exports to the United States were worth 375.8 billion euros in 2023, the impact is considerable. Particularly exposed sectors include the automotive industry, industrial equipment, and the agri-food sector.

Consumers and vulnerable economies

Consumers worldwide will face a generalized price increase, reducing their purchasing power. According to estimates, this situation could cost up to $2,000 per year for average American families.

Emerging economies, often dependent on exports, lack the capacity to absorb the economic shocks of major powers. At the same time, foreign direct investment flows will be disrupted. Europe, which hosts 40% of US FDI (Foreign Direct Investment), is particularly exposed, notably Ireland, where American multinationals contribute half of the GDP.

Opportunities for some players

China: A strengthened strategic position?

Paradoxically, China could come out ahead in the long term. Faced with the uncertainty created by the United States, Beijing is positioning itself as a reliable and predictable partner. Chinese diplomacy is multiplying initiatives to strengthen its ties with Europe and Asian economies.

As a Lithuanian diplomat noted: "China is playing a subtle and intelligent game, similar to what Henry Kissinger did with the Soviet Union and China in the 70s."

Alternative economies

Some countries could benefit from a redirection of trade flows. Taiwan, for example, has seen its exports to the United States increase by $4.2 billion since the beginning of trade tensions with China. Other economies such as Vietnam, Malaysia, or Mexico could also benefit.

How to protect your business?

Faced with this unprecedented situation caused by the US trade war, businesses must adapt their strategy. The scope of this crisis demands concrete solutions to minimize risks:

• Diversify your markets and supplies:
  
  • Explore new markets for your products.
  • Identify suppliers in different geographical areas.
  • Make your supply chain more flexible.
• Use adapted financial solutions:
  
  • Local and multi-currency accounts reduce exposure to exchange rate fluctuations.
  • Payment guarantees secure your transactions.
  • Short-term financing solutions help manage cash flow tensions.
• Adapt your production:
  
  • Evaluate relocation possibilities.
  • Look for local substitutes for imported components.
  • Reduce dependence on heavily taxed materials and goods.
• Maintain active monitoring:
  
  • Follow developments in trade policies.
  • Anticipate changes in international relations.

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Conclusion: navigating uncertainty

The US trade war represents a major challenge for all businesses engaged in international trade. While no one can predict with certainty how this situation will evolve, its impact is already visible and is generating a reconfiguration of economic relations.

In this context, adaptability and resilience become essential qualities. Businesses that can navigate this uncertainty, by diversifying their markets and securing their transactions, will be best placed to weather this period of turbulence.

Globalization as we have known it in recent decades is transforming. A prudent and strategic approach to international trade is necessary to minimize risks and seize the opportunities that will emerge in this new economic environment.

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