Rising Tariff Tensions: How U.S. Trade Wars Are Impacting and Redrawing Global Alliances
In an increasingly interconnected global economy, trade disputes between nations are not new—but the magnitude and frequency of recent conflicts suggest a seismic shift in international economic diplomacy. At the epicentre of this upheaval is the United States, whose assertive trade policies under successive administrations have fuelled tensions with major economies including China, Canada and many other countries including India. This article explores the root causes of these trade wars, the rationale behind the U.S.’s aggressive trade stance, and how global institutions like the World Trade Organization (WTO) and NATO are reacting to the changing geopolitical landscape.
The Foundational Issue of the Recent Trade conflicts and shifts
The foundation of the current trade tensions lies in a shift from multilateralism to economic nationalism, particularly pronounced during and after the Trump administration. The aggressive trade posture is driven by several intertwined motivations:
- Economic Protectionism: Domestic political pressure to protect U.S. jobs and revive manufacturing.
- Strategic Rivalry with China: Ensuring long-term technological and economic supremacy.
- Voter Sentiment: Populist rhetoric on trade resonates with key voter bases in industrial states.
- Global Leadership Reassertion: Using economic policy to reshape global rules in America’s favour.
- Reshoring Supply Chains: The COVID-19 pandemic exposed vulnerabilities in global supply chains. The U.S. responded by promoting the reshoring of critical manufacturing and reducing dependence on foreign suppliers.
- Geopolitical Strategy: Trade policy has become a tool of geopolitical leverage, especially in confronting the rise of China and maintaining influence over allies.
This reassessment of the trade relationships by the USA, through the lens of domestic industry protection, national security, and economic dominance have made major changes in the trade relations across the globe.
Recent developments in global trade have seen a series of significant tariff changes, particularly involving the United States and its major trading partners. Here’s an overview of the key trade disputes and the associated tariff adjustments:
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United States–China Trade Tensions
- U.S. Tariffs on China: In February 2025, President Trump imposed a 10% tariff on all Chinese imports, citing concerns over fentanyl production and distribution. This action was taken under the International Emergency Economic Powers Act (IEEPA).
- China’s Retaliatory Measures: China responded by announcing 10-15% tariffs on U.S. energy products and vehicles. Specifically, there are 15% tariffs on U.S. coal and liquefied natural gas (LNG) and 10% tariffs on U.S. crude oil, agricultural machinery, large-displacement vehicles, and pickup trucks. Additionally, China imposed export controls on critical minerals like tungsten, tellurium, bismuth, molybdenum, and indium.
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United States–Canada Trade Dispute
- U.S. Tariffs on Canada: On February 1, 2025, the U.S. implemented a 25% tariff on all goods from Canada, with a reduced 10% tariff on Canadian oil and energy exports. These measures were also enacted under the IEEPA.
- Canada’s Response: Canada retaliated by imposing 25% tariffs on $106 billion worth of U.S. imports. Additionally, duties on $30 billion worth of U.S. alcohol and fruit took effect on February 4, 2025.
- WTO Involvement: Canada has initiated dispute consultations with the World Trade Organization (WTO), challenging the U.S. tariffs on Canadian steel and aluminium products as inconsistent with U.S. obligations under the General Agreement on Tariffs and Trade (GATT) 1994.
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United States–Mexico Trade Dispute
- U.S. Tariffs on Mexico: Similar to the measures against Canada, the U.S. imposed a 25% tariff on all goods from Mexico, including energy exports, under the IEEPA.
- Mexico’s Countermeasures: In response, Mexico announced its own set of tariffs targeting U.S. goods, aiming to mitigate the impact of the U.S. measures on its economy.
IMPACT ON INDIA
The US announced tariff changes effective April 2, 2025, prompting India to engage with the US government to address concerns over potential reciprocal tariffs. Despite the US reinstating GSP benefits for some countries, India remains excluded. Indian officials aim to prevent trade restrictions from escalating tensions. New tariffs on Indian goods could reduce export competitiveness, especially in textiles, pharmaceuticals, and automotive parts, impacting foreign exchange, employment, and investor confidence.
Global Governance: The Role of WTO and NATO
WTO: Struggling to Stay Relevant – The World Trade Organization has traditionally served as the arbiter of global trade disputes. However, its authority has eroded because The U.S. has paralyzed the WTO’s dispute resolution body by blocking judge appointments. Critics argue the WTO has failed to hold countries like China and USA accountable for non-market practices. There is growing consensus that the WTO needs reform to adapt to modern digital trade, state capitalism, and environmental concerns.
Despite its challenges, the WTO remains the only global forum for negotiating multilateral trade agreements and is actively working toward systemic reform.
NATO: Limited but Growing Role in Economic Security – While NATO is primarily a military alliance; its role in economic security has grown, particularly in securing critical supply chains by ensuring access to essential materials like rare earths, energy, and semiconductors. Further it looks into Cyber security in trade by addressing cyber threats to infrastructure critical to trade. Coordinate sanction by working with member states on sanctions regimes that affect trade, especially concerning Russia and China. NATO’s engagement reflects the increasingly blurred lines between economic and military security in the 21st century.
Image credits: https://www.carscoops.com/2025/01/china-canada-and-mexico-get-hit-by-trump-tariffs-sparking-new-trade-war/
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