President Donald Trump’s return to the White House in 2025 marked one of the most disruptive years for global trade in decades, forcing governments, corporations, and investors to rapidly recalibrate. A sweeping wave of tariffs lifted U.S. import taxes to levels not seen since the Great Depression, transforming trade policy into a central driver of market volatility, diplomatic negotiations, and corporate strategy. While markets adjusted more smoothly than expected, the aftershocks of this trade reset are likely to remain a defining theme in 2026.

Tariffs Redefine the Global Trade Landscape

Trump’s tariff strategy, framed as a bid to revive U.S. manufacturing and rebalance trade relationships, pushed the average U.S. tariff rate to nearly 17% from under 3% at the end of 2024. These measures are now generating an estimated $30 billion per month for the U.S. Treasury, underscoring their fiscal significance. The sudden escalation sent shockwaves through global supply chains and triggered urgent negotiations as trading partners sought exemptions or reduced rates.

Framework agreements were reached with the European Union, the United Kingdom, Japan, South Korea, Switzerland, and several Asian economies. While these deals reduced uncertainty, they often came with higher baseline tariffs and broad commitments to invest in the U.S., leaving critics to argue that partners accepted the “least bad” outcome rather than a genuinely favorable one.

Why the Economic Shock Never Fully Arrived

Despite dire predictions, the global economy avoided a severe downturn. Europe absorbed the impact with relative resilience, aided by exemptions and diversification into alternative markets. Estimates suggest the direct tariff hit to eurozone GDP amounted to less than half a percentage point. China, meanwhile, posted a trade surplus exceeding $1 trillion, reflecting its success in redirecting exports, upgrading its manufacturing base, and leveraging strategic control over critical minerals.

In the U.S., growth proved more resilient than anticipated. After a brief contraction early in the year driven by pre-tariff import surges, the economy rebounded, supported by strong consumer spending and a massive investment cycle tied to artificial intelligence. Inflation remained elevated but manageable, as costs were distributed across global supply chains rather than fully passed on to consumers.

Legal and Geopolitical Risks Loom in 2026

The durability of Trump’s trade framework faces a critical test in 2026. The U.S. Supreme Court is expected to rule on challenges to the legal basis of several tariffs, including so-called “reciprocal” levies. An unfavorable ruling could force the administration to rely on narrower legal tools, potentially reopening negotiations and reigniting uncertainty.

Beyond the U.S., Europe’s trade relationship with China is under increasing scrutiny. As Chinese exporters gain competitiveness through currency depreciation and technological advancement, European policymakers are debating whether defensive measures are needed to address growing imbalances. This dynamic could add another layer of complexity to global trade flows.

Markets Watch for Deals, Not Escalation

For investors, the key question is whether 2026 brings consolidation or renewed confrontation. Talks between Washington and Beijing remain fragile, with temporary arrangements expiring later in the year and high-level meetings tentatively planned. At the same time, the review of North American trade arrangements with Canada and Mexico introduces fresh uncertainty for cross-border supply chains.

What has become clear is that markets have adapted to a higher-tariff world, but not to unpredictability. Stability, even at elevated tariff levels, has proven less damaging than constant policy shifts.