How trade tensions are really affecting the global economy

Companies are not yet rushing to relocate production to the US, but investment and dealmaking have already slowed.

- Peter Foster, Gill Plimmer, Andy Bounds and Aimee Williams

When Britain became the first country to reach a trade agreement with the US in May, after President Donald Trump's announcement of sweeping "reciprocal" tariffs, it was hailed as a blueprint for other key US trading partners.

But almost two months passed before a second country—Vietnam—was able to strike a deal. Meanwhile, details of the British accord are still unclear, unconfirmed, or subject to potential revision.

Britain is fighting to secure a carve-out from higher steel tariffs, for example, but Mr Trump's executive order explicitly reserves the right to reimpose 50 per cent duties if "he determines" that Britain is not complying with a promise to reduce the role of China in its supply chains.

The headline impacts are already being felt; US tariff revenue surged almost fourfold from a year earlier to a record US$24.2 billion (S$30.8 billion) in May, while imports from China fell 43 per cent from the same month in 2024.

But with policymaking so evidently at the caprice of Mr Trump himself, it has become incredibly challenging for businesses to make long-term decisions about supply chains, according to Mr Neil Shearing, chief economist at Capital Economics, a research company.

"Relocating plants is an eight-to 10-year decision, but when you can't predict what is happening next week, let alone next year or in five years, mitigation of the status quo is the likely strategy," he says.

The shocking force of Mr Trump's "liberation day" tariffs announced on April 2 was blunted by his announcement of a 90-day pause within a week. The mood shifted from "extreme panic to qualified concern," says Mr Heiko Schwarz, global supply chain adviser at risk management technology consultancy Sphera.

Now, as countries clamour to strike fresh deals with Mr Trump before the July 9 deadline, deep unease still lingers through global boardrooms and supply chains.