Global Trade in 2025: Tariffs, Uncertainty, and the Search for New Rules

The past year has underscored how global trade is being reshaped less by multilateral consensus and more by unilateral power and strategic bargaining. From reciprocal tariffs imposed by the United States to China’s weaponisation of critical minerals, trade policy in 2025 has been marked by unpredictability and fragmentation. For countries navigating this churn, the challenge is no longer just market access, but managing systemic uncertainty in the global trading order.

Reciprocal tariffs: From campaign promise to policy reality

True to his election rhetoric, “Donald Trump” moved quickly to operationalise reciprocal tariffs, announcing them on what his administration termed “Liberation Day”, barely weeks after returning to office. Despite subsequent exemptions and sector-specific carve-outs, the tariffs were rolled out in August and have since become a central feature of US trade policy.

While the President’s authority to impose such tariffs has been challenged before the “Supreme Court of the United States”, the broader signal is clear: unilateralism is no longer an aberration. In fact, the presence of safeguard clauses against substitute tariffs (such as those under Section 232) in existing US trade agreements — including with South Korea — suggests that partners now factor in the permanence of this approach.

Notably, the feared cascade of immediate global retaliation has not materialised. However, Mexico’s recent announcement of up to 50% tariffs on imports from non-free-trade agreement partners in Asia hints that retaliatory unilateralism may still gather momentum, particularly as the “World Trade Organization” remains largely ineffective in disciplining such actions.

US trade deals: Negotiated, unravelled, renegotiated

Another defining feature of 2025 has been the fluid and often reversible nature of US trade agreements. Finalised largely through Executive Orders, these bilateral deals have been non-reciprocal in substance and legally non-binding in form. Tariff reductions by the US have been linked to non-trade commitments — from regulatory changes to strategic assurances — rather than traditional market access concessions.

The US-China deal illustrates this volatility. After stalled negotiations in Geneva and London, a framework agreement was finalised only in October. It involved a partial rollback of reciprocal and “fentanyl” tariffs in exchange for China pausing export controls on rare earth elements (REEs) and committing to soybean purchases. Yet, with concessions valid for just one year, the arrangement resembles a temporary truce rather than a durable settlement.

Similar uncertainty marked the US-Japan deal, announced in July but mired in disputes over whether Most-Favoured Nation tariffs could be stacked atop reciprocal tariffs. Clarification on a 15% tariff ceiling came only in September, retrospectively. Even the US-EU deal, concluded in July, has faced repeated threats of collapse amid US allegations of discriminatory tech regulation by the European Union.

Pax Silica: How rare earths reshaped supply chain geopolitics

China’s two-phase imposition of export restrictions on REEs and related technologies — in April and October — gave new urgency to global value chain diversification. Given China’s near-monopoly over REE processing, the controls disrupted defence manufacturing, clean energy, and automobile production in the US.

In response, Washington launched “Pax Silica”, a strategic alliance spanning trusted partners such as Japan, South Korea, the Netherlands, the UK, Australia, and others. The objective is to secure the entire critical technology chain — from minerals to semiconductors to advanced AI models — while neutralising China’s capacity to weaponise trade. In the process, earlier initiatives like the Indo-Pacific Economic Framework’s supply chain agreement have faded into the background.

China’s export dominance despite trade barriers

Data from the first eleven months of 2025 shows that China remains the world’s largest exporter, despite facing overlapping tariffs, technology restrictions, and weak domestic demand. Its export basket is increasingly tilted towards high-tech, AI-enabled, and sustainability-linked products.

ASEAN has emerged as China’s largest export destination, overtaking the US, though it also functions as a critical trans-shipment hub. Weak and inconsistently enforced rules of origin have diluted the impact of high US tariffs, allowing rerouted Chinese goods to enter through third countries. Mexico’s new tariffs may close this channel for some ASEAN economies, but CPTPP members such as Vietnam are likely to retain access.

CPTPP’s quiet rise as a rules-based alternative

As confidence in the WTO erodes, the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership” is gaining prominence as a platform for high-standard, rules-based trade. Its membership is expanding, with accession processes launched for Uruguay in 2025 and for Indonesia, the Philippines, and the UAE in 2026.

Crucially, CPTPP’s engagement with ASEAN and the EU through trade and investment dialogues opens the door for convergence between two WTO++ frameworks. If paired with flexible cumulation rules of origin, such cooperation could significantly strengthen global value chain resilience and integration — a critical buffer in an era of persistent trade policy shocks.

Why the rest of the world must chart its own path

With the US showing no inclination to roll back its trade posture, the larger risk is not fragmentation alone, but a drift toward copycat unilateralism. For the global trading system, stability will not come from waiting for Washington to change course, but from cooperative alternatives forged by the rest of the world.

Mega-regional agreements, interoperable rule-books, and pragmatic coalitions may now offer the only viable route to preserving predictability in trade and investment flows. In a world of capricious tariffs and strategic controls, collective rule-making — outside the shadow of US unilateralism — is fast becoming an economic necessity rather than a choice.