Will cowboy Trump’s trade-fu with China turn global trade into the Wild West?

Until a few days ago, it seemed that US President Donald Trump was planning to take on the whole world with tariffs. But now it seems that, instead of waging a trade battle royale, he has set his sights squarely on old rival China.

President Trump has hit the pause button on higher tariffs on most nations for 90 days (leaving a general 10% tariff). Yet, China, which supplies about 14% of US imports, faces exceptionally severe tariffs of 125%.

Trump claims the increase was due to Beijing's readiness to retaliate with its own 84% levy on US goods, a move the president described as showing a "lack of respect".

However, given Trump's political history and anti-China stance, this move also appears to be part of his "unfinished business" from his first term, aiming to fundamentally alter the global trade system reliant on China and challenge the long-held idea that this trade structure is inherently beneficial.

There remains a significant risk that the ongoing trade conflict between the US and China heralds a broader anti-globalisation trend. This trend could eventually lead to the collapse of the liberal, rules-based order which has underpinned international trade, investment, and labour mobility for seven decades. 

It is conceivable this could culminate in a "Balkanised" global economy, divided into American and Chinese spheres of influence featuring separate payment methods, rules, and tech platforms. It is clear that the economic and market fallout from such a scenario would be much more severe.

Global impact

The trade war, initiated by Trump's tariff policies, has led to significant economic disruptions. 

According to a recent report from Reuters, global stock markets experienced their largest losses since the pandemic, with the S&P 500 falling 9.08%, the Nasdaq declining 10.02%, and the Dow dropping 7.86% in a single week. Investment bank JP Morgan has estimated a 60% chance of a global recession by year-end, up from 40% previously.

Economic growth projections have been downgraded, with the OECD forecasting global growth to dip to 3.1% in 2025 and further to 3.0% in 2026, down from 3.2% in 2024. In the US, growth is expected to slow to 2.2% in 2025 from 2.8% in 2024, driven by rising inflation and tighter monetary policy, as noted by Fed Chair Jerome Powell, who described the tariffs as "larger than expected," elevating risks of higher inflation and slower growth.

Global trade volumes, while not collapsing, are showing clear signs of rerouting. Data emerging throughout 2024 and into early 2025 indicates a marked shift away from direct US-China trade, with intermediary countries in Southeast Asia, Mexico, and parts of Eastern Europe picking up some of the slack. 

According to a recent report from Reuters, global stock markets experienced their largest losses since the pandemic, with the S&P 500 falling 9.08%, the Nasdaq declining 10.02%, and the Dow dropping 7.86% in a single week. Investment bank JP Morgan has estimated a 60% chance of a global recession by year-end, up from 40% previously.

However, this reconfiguration is neither seamless nor cost-free. 

Businesses report significant logistical challenges, increased operational costs, and difficulties in replicating the scale and efficiency of established Chinese manufacturing ecosystems.

The impact extends beyond the US, affecting major trading partners. Canada has seen total employment fall and unemployment rise in March due to tariff uncertainty, while Japan, a top US trading partner, faces a "national crisis" with banking shares plunging, setting Tokyo's stock market for its worst week in years. 

The EU, facing a 20% duty, has declared the tariffs "damaging, unjustified," with trade commissioner Maros Sefcovic preparing to defend EU interests.

Consumer impacts are notable, with US tariffs potentially increasing prices for goods like high-end iPhones, which could cost nearly $2,300, and running shoes, affecting sectors like sporting goods. 

Oxford Economics reports that Trump's tariffs, including a 25% tariff on autos and auto parts, will shave 0.7 percentage points off US GDP growth this year, with weaker growth, higher unemployment, and higher inflation expected in Canada, Mexico, and the US compared to baseline forecasts.

China's retaliation, including a 34% tariff on US goods and controls on rare earth exports, has further escalated tensions, with state media accusing the US of subverting the international economic order. This escalation has heightened fears of a prolonged trade war, with significant repercussions for global trade flows and economic stability.

The ramifications extend beyond pure economics. The World Trade Organization (WTO) continues to be sidelined, its dispute settlement mechanism hampered, leaving trade conflicts to be managed through power politics rather than established rules. This erosion of multilateralism adds another layer of complexity and risk for global businesses.

What does it mean for Bangladesh?

For nations like Bangladesh, the US-China rivalry presents a complex mix of potential threats and opportunities. Dhaka has officially maintained a position of strategic neutrality, seeking to balance its relationships with both superpowers, who are significant trade and development partners.

Bangladesh, heavily reliant on its garment exports, faces significant challenges from the US-China trade war. In 2024, Bangladesh exported $8.4 billion to the US, up 1.1% year-on-year, driven by garments, which account for 90% of exports, with imports from the US at $2.2 billion, down 1.5%.

Until the sudden postponement, Bangladeshi exports to the US faced a 37% levy, threatening to strain trade with its largest single-country export market. If it is indeed reinstated in three months what can Bangladesh do?

"Our strategy should aim to shift the tariff burden onto buyers. A key advantage is that buyers have limited alternatives, as many of our competitors face similar or even higher reciprocal tariffs.," said Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office in a recent interview.

"Bangladesh could argue that it exports low-price and essential items, particularly affordable readymade garments. If there is an opportunity to classify other exported goods as essential items in the US market, Bangladesh should actively pursue that approach," he added.

Commerce advisor SK Bashir Uddin said Bangladesh plans to increase imports of essential goods from the USA and reduce its trade surplus with the country

Under the WTO regulations, Bangladesh cannot lower duties for a specific country. However, the government can determine its imports, including fuel, though it cannot impose preferences on the private sector.

This trade war comes at a moment when Bangladesh is actively seeking to strengthen ties with China. 

In March 2025, during Chief Adviser Professor Muhammad Yunus's visit to China, Bangladesh secured a commitment of $2.1 billion in Chinese investments, loans, and grants, including $1 billion from nearly 30 Chinese companies for the exclusive Chinese Economic and Industrial Zone (CEIZ). 

This investment is expected to create jobs and enhance manufacturing capabilities, potentially attracting firms looking to diversify from China due to US tariffs.

Moreover, China has granted 100% duty-free access to Bangladeshi products, effective as of September 2024, and extended until 2028, even after Bangladesh's LDC graduation in 2026. 

This policy, previously at 98% in 2022, covers 8,256 products, including ready-made garments, fish, and agricultural products, offering a significant opportunity to boost exports to China, which is Bangladesh's largest trading partner with imports worth over $22.5 billion and exports at about $600 million. This could help reduce the trade deficit and diversify export markets.

The World Bank projects Bangladesh's real GDP growth to decelerate to 4.0% in FY25, down from 5.2% in FY24, driven by weak consumption and exports, but expects acceleration to 5.5% in FY26, indicating some resilience. This slowdown is partly attributed to global economic uncertainty, including the trade war, but increased Chinese investment and duty-free access could provide a buffer.

Efforts to diversify manufacturing are also underway. Reports indicate a push towards electronics, with a goal to export $5 billion of digital devices by 2025, and Chinese investments in sectors like leather, ICT, and light engineering, potentially creating better-paying jobs and moving up the value chain. 

While the US-China trade war poses significant risks for the global economy, particularly through US tariffs, for countries like Bangladesh this could end up offering potential benefits. Bangladesh's ability to navigate this turbulent period will depend on its capacity to diversify exports, attract investment, and implement structural reforms to sustain growth.