2025: The year of the trade tempest

The US is redefining global trade policy landscape

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Looking back at a year marked by a capricious and discriminatory use of trade policy instruments, the following trends stand out.

Reciprocal tariffs came and stayed: True to his campaign promise, President Donald Trump announced reciprocal tariffs on “Liberation Day”, a little over two months after assuming office. With some modifications, several exceptions and exemptions, the reciprocal tariffs were implemented in August. The power of the President to impose reciprocal tariffs has since been challenged before the United States Supreme Court. However, the fact that some trade deals (US-South Korea, for example) have inbuilt provisions for protection against potential substitute tariffs (under section 232, for example) indicates acceptance of the fact that unfair trade policy unilateralism set in motion by the US may be here to stay.

The much-feared, widespread retaliation by other countries has not been evident thus far. Mexico's announcement, earlier this month, that it will impose up to 50 per cent tariffs on a broad range of imports from its non-free-trade agreement trade partners (in Asia, effectively the non-Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade partners such as Thailand, Indonesia, South Korea, India and China) could spur a trend of unilateral, retaliatory trade policy action from affected countries. This is especially so as the World Trade Organization (WTO), whose primary objective is to promote freer and fairer trade, has so far been a quiet bystander.