Following Donald Trump’s “Liberation Day,” investors are grappling with a fundamental question: Is a trading order possible that is less dependent on the United States? Or are we on the brink of a new Great Depression, as some doomsayers suggest?
The parallels with the 1930 Smoot-Hawley Act are unmistakable. Back then, the United States raised average import tariffs by six percentage points, contributing to a global collapse in trade. Trump’s tariffs are even more ambitious: they raise the average US tariff from around 2 to roughly 25 percent. While Smoot-Hawley wasn’t the primary cause of the Great Depression, it did exacerbate international tensions and undermined multilateral cooperation. The question now is: will history repeat itself?
There are reasons for pessimism. The US threats have already triggered retaliatory tariffs, with China leading the way. Beijing responded immediately with similarly steep tariffs on American products. Furthermore, US exporters themselves will be hit hard. Higher tariffs on imported raw materials will raise production costs for American exporters, making their goods more expensive and less competitive in foreign markets. This could lead to layoffs or offshoring—ironically, the very things Trump claims to want to prevent.
Still, there are also reasons for cautious optimism. The world of 2025 is not that of 1930. As Washington pulls back, other regions are accelerating efforts to strengthen trade relations. The two largest free trade blocs in the world—RCEP and CPTPP—operate without US involvement. Trump’s tariffs risk economically isolating the United States.
Southeast Asian countries are actively deepening their trade networks. Singapore is promoting two major regional initiatives aimed at creating a free trade zone spanning the Asia-Pacific region. Meanwhile, ASEAN is planning talks with the Gulf states to forge new trade agreements.
The European Union is also stepping up its efforts. With seventy-four countries already in its trade network, Brussels is working to finalize long-delayed deals with Mercosur and Mexico. Ursula von der Leyen recently agreed to a request from the Emirates to begin trade talks, as both parties seek alternative markets in response to US tariffs.
The paradox is that this American isolation does not necessarily mean the collapse of global trade, but rather its restructuring. China, which has gained enormous significance in global trade over the past two decades (now accounting for about 12 percent of global exports), will undoubtedly try to fill the gap and expand its economic influence in response to US pressure.
That, in itself, may spark new tensions. China’s trade surplus approached one trillion dollars on an annual basis last year. This could lead to friction in other regions if cheap Chinese products flood their markets. Von der Leyen has already warned that the EU will not hesitate to take “protective measures” against a flood of low-cost Chinese goods.
The strong dependence of many countries on the American consumer market also cannot be reduced overnight. Despite America’s waning influence, the country remains a major buyer of global products, as evidenced by last year’s trade deficit of 918.4 billion dollars.
The heart of the issue is not economic but political. Support for this trade war is strikingly low. Among registered US voters, 54 percent oppose tariffs and only 42 percent support them, with that support concentrated mostly among Republicans, particularly those aligned with the Maga movement. In Congress, Republican lawmakers defend tariffs as a bargaining tool, but rarely praise them for their own merits.
Global trade is facing an existential test, but it is more resilient than often assumed. The new trade structures being forged—without US dominance—may lead to a more diversified and therefore likely more resilient system.
However, for many other economies, uncertainty is followed by adaptation—something humans are better at than any other species on Earth. Southeast Asian countries like Indonesia, Thailand, and Malaysia, which were initially hit hard by US tariffs, are already making concessions and actively seeking dialogue. Their small, open economies are integrated into global supply chains with very low trade barriers against American products, making it relatively easy for their governments to offer further concessions.
Latin American countries have largely avoided additional punitive tariffs, as expected. The main reason is that—Mexico aside—these countries have trade deficits or only small surpluses with the US, placing them lower on Trump’s priority list in the trade war.
Global trade will weather the Trump storm, albeit in a different form. The world moves on, with or without America at the helm. And perhaps that’s ultimately a healthy development for the global trading system.
Han Dieperink is Chief Investment Officer at Auréus Vermogensbeheer. He previously served as Chief Investment Officer at Rabobank and Schretlen & Co.