Trump shook up global trade this year; some uncertainty may persist in 2026

Dec 22 (Reuters) - President Donald Trump's return to the White House in 2025 kicked off a frenetic year for global trade, with waves of tariffs on U.S. trading partners that lifted import taxes to their highest since the Great Depression, roiled financial markets and sparked rounds of negotiations over trade and investment deals.

His trade policies - and the global reaction to them - will remain front and ​center in 2026, but face some hefty challenges.

WHAT HAPPENED IN 2025

Trump's moves, aimed broadly at reviving a declining manufacturing base, lifted the average tariff rate to nearly 17% from less than 3% at the end ‌of 2024, according to Yale Budget Lab, and the levies are now generating roughly $30 billion a month of revenue for the U.S. Treasury.

They brought world leaders scrambling to Washington seeking deals for lower rates, often in return for pledges of billions of dollars in U.S. investments. Framework deals ‌were struck with a host of major trading partners, including the European Union, the United Kingdom, Switzerland, Japan, South Korea, Vietnam and others, but notably a final agreement with China remains on the undone list despite multiple rounds of talks and a face-to-face meeting between Trump and Chinese leader Xi Jinping.

The EU was criticized by many for its deal for a 15% tariff on its exports and a vague commitment to big U.S. investments. France's prime minister at the time, Francois Bayrou, called it an act of submission and a "sombre day" for the bloc. Others shrugged that it was the "least bad" deal on offer.

Since then, European exporters and economies have broadly coped with the new tariff rate, thanks to various exemptions and their ability to find ⁠markets elsewhere. French bank Societe Generale estimated the total direct impact of the tariffs ‌was equivalent to just 0.37% of the region's GDP.

Meanwhile, China's trade surplus defied Trump's tariffs to surpass $1 trillion as it succeeded in diversifying away from the U.S., moved its manufacturing sector up the value chain, and used the leverage it has gained in rare earth minerals - crucial inputs into the West's security scaffolding - to push back against pressure from the U.S. or ‍Europe to curb its surplus.

What notably did not happen was the economic calamity and high inflation that legions of economists predicted would unfold from Trump's tariffs.

The U.S. economy suffered a modest contraction in the first quarter amid a scramble to import goods before tariffs took effect, but quickly rebounded and continues to grow at an above-trend pace thanks to a massive artificial intelligence investment boom and resilient consumer spending. The International Monetary Fund, in fact, twice lifted its global growth outlook in the months following Trump's "Liberation Day" tariffs announcement ​in April as uncertainty ebbed and deals were struck to reduce the originally announced rates.