Trump's tariffs and their impact on global markets

In February 2025, U.S. President Donald Trump announced a new wave of tariffs, imposing 25 percent duties on steel and aluminum imports. The move, reminiscent of his previous trade policies during his first presidency, caused turmoil in global markets and impacted industries, the economy and international relations. While some industries have benefited from the measures, others have faced rising costs and supply chain disruption.

Market Reaction

Despite initial concerns, global financial markets proved resilient. Major indices, including London's FTSE 100 and the pan-European STOXX 600, hit record highs after the tariffs were announced. Shares of U.S. steel producers rose as they looked to gain a competitive advantage by reducing competition from overseas. However, general trade uncertainty has led to volatility in major stock markets, and investors are watching developments closely.

Industries that rely heavily on imported materials, such as automotive, technology and beverages, are feeling the pressure. Companies such as Volkswagen and Diageo, which have significant manufacturing facilities in Mexico and Canada, are particularly vulnerable to rising input costs. In addition, U.S. manufacturers dependent on imported steel and aluminum, such as General Motors and Boeing, have warned of possible price increases and lower profits as a result of rising material costs. Uncertainty surrounding the imposition of tariffs has also increased commodity price volatility.

International response

The European Union (EU) and other affected countries are discussing countermeasures. Germany and the EU have warned of possible retaliatory measures, while the UK steel industry has expressed deep concern about the impact on exports and a possible increase in cheaper imports from other markets. The EU response is expected to be slow due to the complex decision-making process, but credible threats of retaliation seem very plausible. China, which has historically been the main target of Trump's tariffs, is also expected to retaliate. 

In previous trade disputes, China has retaliated against U.S. agricultural products by penalizing American farmers. A similar response could be on the horizon, further increasing tensions between the two economic giants. In addition, Asian markets have reacted cautiously as countries such as Japan and South Korea consider the potential economic impact on their export-oriented industries.

Economic Impacts

Tariffs are taxes on imported goods that tend to increase costs for domestic industries that depend on these imports. As a result, consumers often have to bear the burden through higher prices. Historical evidence suggests that such tariffs can hurt domestic consumers more than benefit the economy. For example, in 2018, tariffs on washing machines drove up retail prices without providing significant economic benefits to domestic producers.

Global companies will now have to deal with potential supply chain disruptions. Companies dependent on steel and aluminum imports may be forced to find alternative sources, renegotiate contracts, or pass higher costs on to consumers. Such changes could slow economic growth and reduce consumer confidence. In addition, U.S. exporters could suffer if retaliatory tariffs make U.S. goods more expensive in overseas markets, which could reduce demand.

Strategic Considerations

President Trump's use of tariffs has often been a strategic negotiating tool rather than a hard-line political stance. In the past, threats of tariffs have been canceled or delayed in exchange for concessions from trading partners. This unpredictability creates uncertainty in global markets, making it difficult for companies and investors to plan long-term strategies. The Biden administration, which took office in 2021, sought to improve trade relations and stabilize customs policy. However, Trump's return to aggressive tariff policies in 2025 has led to new global trade tensions, resulting in new economic and political tensions between the U.S. and its trading partners. The long-term impact of these tariffs will depend on upcoming negotiations and a possible diplomatic agreement between the countries involved.

Bottom line

Trump's recent tariff announcements have caused both reaction and concern in global markets. While some industries have adapted or even thrived, others face serious challenges. The long-term consequences will depend on the duration of these tariffs, the response of international partners, and the ability of global industry to adapt. In an increasingly interconnected world, trade policies have far-reaching implications that extend far beyond national borders and shape the future of global trade.As governments and businesses adapt to the new realities of trade, the coming months will determine whether these tariffs will boost domestic production or increase global economic instability.