Post by : Anis Farhan

What’s Driving the Tariff War?

In early April, the U.S. made a historic move: it slapped a 10% baseline tariff on all imports, with higher levies for specific countries (34% on China, 20–25% on EU, Japan, South Korea, and India). Dubbed the “Liberation Day” tariffs, this sweeping expansion sparked immediate backlash across global economies.

China responded swiftly, deploying 125% retaliatory tariffs across U.S. goods—escalating from 34% to 84% and finally capping at 125%. The EU matched the move, rolling out 25% duties on US imports like beef, soya, and tech equipment. Canada also joined with tariffs, challenging what it called “unjustified” U.S. levies reddit.com.

The result: a global trade standoff with severe market consequences and rising economic anxiety.

Market Mayhem & Volatility

Markets reacted instantly. On the day of the U.S. announcement:

• U.S. futures plunged (S&P -4.6%, Nasdaq -10%) 

• European stocks slumped (Stoxx Europe 600 down 0.8%)

• Asian markets also felt the pressure, with Hong Kong and Shanghai dipping 

• Investors fled to safe havens: gold prices climbed, Treasury bond yields fell 

Shockwaves spread beyond equities. Global bond markets shook, currencies fluctuated, and commodity prices—especially oil—reacted to the looming threat of supply chain disruptions .

Sector Impact: Pain in Manufacturing & Tech

The tariffs hit some industries harder than others:

• Manufacturers like Boeing and Caterpillar saw share drops as export uncertainty rose

• Tech firms faced supply chain chaos—Apple and Intel stocks wavered amid variable costs 

• Auto and consumer goods suffered, with U.S. vehicle prices predicted to rise and retailers like Walmart facing inflationary pressures

Luxury sectors slowed too. Bain & Co. projects a 2–5% drop in global luxury goods sales in 2025, citing uneven demand and increased costs 

Supply Chains Rerouted & Firms in Flux

Companies are scrambling to adjust. Many UK firms—90% of those surveyed—are renegotiating contracts, adding force majeure clauses, and seeking alternative suppliers as U.S. tariffs disrupt trade 

Auto supply chains are particularly strained. Canada’s 100% EV tariffs and China’s retaliations on agricultural goods show how dependent global industries have become

Tesla has even taken the EU to court over new EV tariffs on Chinese-made vehicles—a sign that even giants are feeling the squeeze .

Currencies & Central Banks Respond

Currency markets echoed the uncertainty. The U.S. dollar weakened, nearing a three-year low, while several currencies held their ground or strengthened .

Central banks from Switzerland, Norway, Sweden, and the ECB lowered interest rates, hoping to cushion economic pressures. The Fed held rates steady but warned of inflation spikes due to ongoing tariffs

Geopolitics & Trade Policy Shifts

The tariff war is reshaping alliances:

• U.S.–China tensions eased slightly through a 90-day tariff pause (bringing mutual tariffs to 10%)—set to expire July 9 

• The U.S. is eyeing tariffs on India for buying Russian energy, proposing up to 500% duties under a new Bipartisan bill 

• In response to Trump’s 50% tariff threat, the EU announced anti-coercion measures, targeting U.S. services and tech 

Legislative pushes are also underway, like the Trade Review Act, aiming to rein in executive tariff powers—a sign that U.S. lawmakers are uneasy with sweeping tariff authority 

Why It Matters

1. Growth slowdowns: Goldman Sachs warns tariffs could shave $1.4 trillion from global GDP

2. Inflation pressures: Tariffs are passing costs to consumers on cars, steel, food—the Fed knows it

3. Market risk: Ongoing volatility, trade spillovers, and inflation fears hint at long-term instability 

4. Shifting strategies: Companies are globalizing supply, central banks are recalibrating, and governments are scaling treaties and legislative oversight.

Insights

The 2025 tariff war is more than headline news—it’s a structural shock that’s reverberating through markets, supply chains, currency systems, and diplomatic ties. With key dates like July 9 and rising geopolitical risk ahead, what seemed a short-term crisis is fast becoming a long-term reordering of global trade.

Disclaimer:

This article is prepared for informational and editorial purposes under Newsible Asia. Trade policies and economic impacts are current as of June 2025 and may evolve rapidly.