The fragmented future of global trade
As US turns away from multilateralism, bilateral deals and retaliatory tariffs are redrawing the map of world trade—reshaping alliances, straining supply chains, and leaving poorer nations to bear the brunt
Over the past four to five months, the global economy has undergone massive changes, creating uncertainty in international trade, intensifying trade conflicts, and triggering retaliatory measures. Bilateral trading frameworks have gained momentum, disproportionately harming developing countries that face higher tariffs.
While developed countries had committed to following WTO-led trading rules, the bilateral nature of reciprocal tariffs—bypassing multilateral systems—raises fears of a broader trade war that could disrupt markets and reduce trade volumes for poorer nations. The WTO anticipates a 2.7% increase in world merchandise trade volume, slightly above its prior estimate of 2.6%. However, its 2025 forecast has been revised downward to 3% from the earlier 3.3%.
The logic behind the introduction of "reciprocal tariffs" by the US government was based on the idea that US trade partners should face tariffs equivalent to those imposed on American goods. This has had long-lasting implications for the global geopolitical and economic order. Instead of relying on global trade rules, Trump pursued bilateral negotiations, creating a more fragmented trade environment.
Even countries that had signed free trade agreements (FTAs) with the US faced new tariffs. The US has FTAs with 20 countries, yet reciprocal tariffs—at varying rates—have been imposed on them, undermining confidence in both FTAs and preferential trade agreements (PTAs).
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For example, although Korea has an FTA with the US, a 15% reciprocal tariff was imposed, leading Korea to agree to create a USD 350 billion fund to invest in the US. Other countries are beginning to follow suit.
In essence, Trump's reciprocal tariff policy marked a turning point: accelerating the decline of US-led globalisation, strengthening regional blocs, and deepening strategic rivalry with China—all of which continue to shape the geopolitical landscape today. Smaller economies face even greater challenges, particularly countries like Bangladesh, which depend heavily on a few export products and limited markets.
Initially, the policy was viewed as the US reacting to China's rapid rise and gradual takeover of global leadership. The US–China trade war escalated as tariffs were imposed and counter-imposed, extending beyond economics into technology, supply chains, and security, thereby cementing strategic competition between the world's two largest economies.
However, the dynamic shifted when China retaliated by restricting exports of rare minerals—such as tungsten, antimony, graphite, magnesium, and bismuth. These materials are critical for electric vehicles, wind turbines, consumer electronics, and clean energy technologies. Their restriction caused an immediate impact on share markets, a fall in the US dollar, and rising interest rates. As a result, Trump softened his stance and began signing bilateral agreements with China, although tariffs remain higher than before.
US–EU bilateral trade has also undergone several revisions. Finally, the US agreed to a joint statement with the EU on reciprocal tariffs, effective from 1 September 2025. The US committed to applying only the MFN tariff on certain products unavailable domestically, including cork, aircraft and aircraft parts, generic pharmaceuticals and their ingredients, and chemical precursors from the EU. Both parties also agreed to consider other sectors and products critical to their economies for similar treatment. They will negotiate rules of origin to ensure that the benefits of the Reciprocal Trade Agreement are maintained.
Meanwhile, the EU committed to procuring LNG, oil, and nuclear energy products, and to cooperating on technology security to prevent leakage. Both sides pledged to support each other's investments across sectors, with the EU also committing to military equipment procurement, reducing non-tariff barriers, and working towards common standards for a transatlantic marketplace. Furthermore, the EU will address the interests of US SMEs under the EU Green Deal by maintaining standards for circularity and sustainability while greening its economy.
The US and EU also pledged greater cooperation on export restrictions imposed by third countries on critical minerals and other resources. They reaffirmed commitments to intellectual property rights, labour rights, and a moratorium on customs duties for electronic transmissions, supporting efforts to make this a permanent global standard at the WTO. Similar requests have been made by the US to Indonesia and may be tabled at the upcoming 14th WTO Ministerial Conference in Cameroon on 26 March.
These framework agreements reveal a pattern: countries are agreeing to import large volumes of US products, address non-tariff barriers, strengthen IPR and labour rights, and increase US-bound investment. A notable clause requires countries not to restrict exports of rare natural resources unavailable in the US but critical for its industries. This leaves countries without such resources with limited bargaining power in negotiations.
As international trade dynamics shift, smaller countries are likely to suffer most. Many have turned to regional trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) to reduce reliance on the US market. Europe and Asia are diversifying trade routes, boosting cooperation with China, and hedging against American unpredictability.
For developing economies, the impact is substantial. Export-dependent nations in Asia, Africa, and Latin America face volatility due to disrupted supply chains. Some countries have benefited by positioning themselves as alternative suppliers—Vietnam in electronics, Mexico in manufacturing—but these are exceptions.
Tariff policies have reinforced economic nationalism, encouraging protectionist measures worldwide. This has heightened geopolitical polarisation, with countries aligning more closely with either the US or China in both economic and technological spheres. The consequences are both short and long term: trust in the US as a reliable trade partner has eroded, supply chains are decoupling, and the Indo-Pacific region is emerging as the centre of new geopolitical rivalries.
The ripple effects are especially pronounced in developing economies. While some gained from new investment, most faced uncertainty. Overall, reciprocal tariffs eroded confidence in US predictability, pushing allies and adversaries alike towards diversification and fostering a multipolar trade landscape.
Trump's reciprocal tariff policy was not merely an economic manoeuvre but a catalyst reshaping the global order. By undermining multilateralism, intensifying great-power rivalry, and fuelling protectionism, the policy accelerated the decline of US-led globalisation and laid the foundations for a more fragmented and contested world system.
Bangladesh has yet to sign a bilateral agreement but has nonetheless made commitments to reduce its trade deficit with the US, which exported about USD 3.05 trillion in 2023. By contrast, Bangladesh's exports amounted to only USD 8.56 billion—just 0.28% of US exports. Dhaka's pledge to import expensive goods from the US has already drawn criticism, and it faces looming competition in its largest export market, the EU, as redirected exports from China, India, and others seek a bigger share.
The overall geopolitical landscape is shifting rapidly. With the addition of reciprocal tariffs to the existing pressures of AI-driven competition, critical resource conflicts, and climate change–induced scarcity, instability is deepening. In this multipolar world—where a growing number of powerful actors are locked in rivalry—technological competition threatens to undermine international cooperation. Countries like Bangladesh must tread carefully, deploying expert teams to monitor these changes and feed insights into policy formation.
Ferdaus Ara Begum is the CEO of BUILD — a public-private dialogue platform that works for private sector development.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
