The global economic landscape faces profound uncertainty following the imposition of sweeping tariffs by the United States, a move that has already triggered retaliatory measures, market volatility, and warnings of severe disruption to international trade and supply chains.
The US policy shift, unveiled on April 2 under the banner of "Liberation Day", introduced a baseline 10 percent tariff, coupled with higher "reciprocal tariffs" targeting specific countries based on bilateral trade deficits. However, in a dramatic volte-face on April 9, the US announced a 90-day pause on the "reciprocal tariffs", claiming it needed time to negotiate deals with individual countries on the tariffs.
No such courtesy was extended to China, with the US escalating the tariffs on the nation's exports to 145 percent.
Major economies and international organizations have all expressed deep concern about the impact the tariffs will have on the global and domestic economies as the US pivots away from international trading norms.
China's commerce ministry quickly vowed countermeasures to "safeguard its own rights and interests."
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The EU described the tariffs as a "major blow" and began preparing retaliatory steps. Japan's Prime Minister Shigeru Ishiba called the US move a "national crisis", while Australian Prime Minister Anthony Albanese criticized the baseline tariff as "completely unnecessary".
The tariffs have also injected a significant dose of unpredictability into the global economy.
"Uncertainty and volatility are undoubtedly contributing to a more cautious economic and business environment," World Bank President Ajay Banga recently told reporters, referring to market turbulence caused by the US tariff policy. He added this uncertainty would "certainly" lead to slower growth than previously expected.
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Kristalina Georgieva, managing director of the International Monetary Fund, said a day after the tariffs were announced: "We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth."
By April 17, the eve of the Spring Meetings of the IMF and World Bank, Georgieva said that the trade tariff uncertainty was "literally off the charts".
"The world economy's resilience is being tested by the reboot of the global trading system that threatens to cause turbulence in financial markets," she said.
Poorest hit hardest
Fears of a tariff-induced global recession have raised concerns about the potential impact on the world's poorest people, and those at the bottom of the US socioeconomic ladder.
"I sincerely hope that we will have no recession, because a recession will have dramatic consequences, especially for the poorest people in the world," UN Secretary-General Antonio Guterres said on April 9.
Rebeca Grynspan, head of the UN Conference on Trade and Development, said in a statement to UN News that the 44 Least Developed Countries, contributing minimally to US trade deficits, should be exempt, as tariffs would worsen their debt crises.
"Our emphasis has been to put attention on what can happen to countries that are more vulnerable, such as the least developed countries, and small island developing states. What is happening to those countries is what really worries us," she said.
Tim Jones, head of policy at the UK-based Debt Justice campaign group, said on his blog that the tariffs will intensify the debt crisis in lower-income countries.
He also said that tariffs hit countries needing export earnings to service external debts, which are potentially compounded by currency fluctuations and rising borrowing costs.
A panel discussion, Global Responses to an American Reset of International Trade, was held at the Center for Asia Policy Studies at the Brookings Institution, Washington, DC, on April 14, with Mireya Solis, the center director calling the US tariffs "of utmost importance".
Shujiro Urata, a professor emeritus at Tokyo's Waseda University, told the panel fears of a recession loom large. The tariffs, he said, "would slow down the US economy, which was doing OK before this," with negative spillover effects for Japan, Europe, and other economies.
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Urata warned the "regressive nature" of tariffs could also worsen income distribution in the US. A group of people in the United States who are not so rich maybe supported the policy for a better economy. But I think they are the ones, I'm afraid, who will be hurt most by this tariff, he said.
Solis said "American farmers are very worried about losing export markets abroad".
Sourabh Gupta, a senior fellow at the Institute for China-America Studies in Washington, told China Daily the US had opened a "real can of worms" and injected unpredictability into the international trading system. He said markets are "beginning to speak", and volatility has been a key feature.
At the Brookings event, Scott Kennedy, a senior adviser at the Center for Strategic and International Studies (CSIS), spoke of the tariff announcements impact on US markets.
You saw one of the reasons the US backed off last week is the huge negative-effect signal sent by the nation's stock markets, he said.
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, expressed pessimism about a quick recovery, saying the US stock market is unlikely to recover in 2025. He also cautioned that a US recession is "likely".
Jesus Carrillo, a guest lecturer at El Colegio de Mexico, said at the same event that Mexico is already facing the likelihood of a recession.
Dollar's demise?
Xie Jianhua, founder of the US-China E-commerce &Trading Chamber, told China Daily that the deeper crisis lies in how the US president's policy logic — including interference with the US Federal Reserve, "contempt for international norms, like threatening to annex Greenland or seize the Panama Canal" — and an erratic diplomatic stance, unravels the "social network" underlying the US dollar's dominance.
The dollar's hegemony relies on global trust in institutional stability, not intimidation, and "rising US Treasury yields, a plummeting dollar index, and soaring gold prices are the market's vote of no confidence in that trust," he said.
Xie added that continuing debt spirals, overusing tariffs, and trampling upon international rules, risk repeating the decline seen with the British pound, drawing parallels with financial crises of the 1930s and 1970s.
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Gupta said trade issues are already impacting the US dollar. While a trade war-induced global recession could lead investors to "crowd into the dollar" which is traditionally seen as a safe haven, this would present the US with a conundrum.
The US wants a weaker dollar, but at the same time, they want to keep the dollar as the king of the currency jungle, Gupta said.
Solis said at the event there is "the possibility that folks begin to lose confidence in the US dollar".
The US aggressive tariff policies will likely undermine the US dollar's role as a global reserve currency. Other nations will shift to more stable financial assets due to unpredictable US monetary policy, Chris Pereira, the founder and CEO of iMpact, a communications and business consulting group, told China Daily. "And once the dollar's trust is gone, it's tough to restore," he said.
China's firm stance
While the global response to the US tariffs has differed — some countries have opted for negotiation and others retaliation — China has remained firm from the outset, experts said.
Kennedy, from CSIS, said of China's firm response: "They were ready for whatever was going to come their way … they felt they had to push back, because they were already facing very high numbers (from previous tariffs)".
He said China feels it has advantages in this "game of chicken". The reasons include diversified trading partners, the US comprising only 14 percent of China's exports, China's having less market-sensitive financial sector compared to the US, and its position as the top trading partner for over 100 countries.
"The Chinese are in this, as they say, to the very end," Kennedy said.
Gupta said while China's response has been firm, maintaining a measured approach has become difficult because the US keeps "ratcheting up" the stakes, resulting in a possible collapse in bilateral trade.
Writing in Foreign Affairs on April 16, Michael Beckley, an associate professor of political science at Tufts University, said from Beijing's perspective, "the trade wars Washington is stoking are not mere economic spats. They are an assault on China's comprehensive national power — and a potential prelude to a shooting war."
The EU initially moved toward retaliation against the tariffs but paused after the US offered a 90-day window for talks. At the same time, the EU approved on April 9 its first retaliatory measures against US tariffs, effective April 15. The measures impose a 25 percent tax on a variety of US imports, countering the administration's March decision to levy a 25 percent tariff on all steel and aluminum imports to the US.
"The EU's tariffs are related not to the reciprocal tariffs, but they're related to the auto tariffs … as well as the steel and aluminum tariffs," Gupta explained.
Urata, from Waseda University, said retaliation is not a viable option for Japan for several reasons. "One, of course, is national security. We depend on the US for national security," he said.
Instead, Japanese companies are focusing on diversification.
"Now they talk about a 'US plus one' or 'America plus one' strategy because we cannot really depend on the US as an export market as much as we used to … Japanese companies have to diversify their export destinations," he said.
Carrillo, from El Colegio de Mexico, said Mexico is largely shielded by the United States-Mexico-Canada Agreement. However, it is still facing uncertainty and potential rule changes and is also looking to diversify.
"The interdependence of our economy is much bigger[with the US]," he said. "But since we are moving to a deals-based international trade instead of a rules-based international trade system … the European Union is a perfect fit for the Mexican economy," Carrillo noted, suggesting that Mexico might need to increase local content for exports to the US.
Breaking the system
The tariff turmoil is straining the multilateral, rules-based trading system, largely built under US leadership after World War II.
"The US is violating WTO rules," said Urata. "It is very sad to see the US destroying the WTO system which the US played the key role in establishing. You can destroy a system very quickly, but it takes so much time and energy to build or rebuild the system," he said.
Otaviano Canuto, a former World Bank vice-president, warned that "reciprocal tariffs" undermine multilateralism and WTO principles like non-discrimination, potentially reviving destructive patterns from the 1930s.
Beckley echoed this historical parallel, writing, "That's how the world fell apart in the 1930s: protectionism, fear, and rising powers with no way to grow but through force."
"Trade wars don't just raise prices. They unravel alliances and push rivals toward confrontation. By treating global affairs like a transactional hustle, the United States risks tearing down the very system that has kept the peace for generations."
He described the current US approach as one of becoming a "rogue superpower", one that is "aggressive, powerful, and increasingly out for itself," suggesting this path is driven partly by the nation's capability to act unilaterally.
WTO Director-General Ngozi Okonjo-Iweala warned on April 10 that the US-China tariff war could slash bilateral merchandise trade by "as much as 80 percent "and "severely damage the global economic outlook."
"It is critical for the global community to work together to preserve the openness of the international trading system," Okonjo-Iweala said, cautioning against the "potential fragmentation of global trade along geopolitical lines."
