Analyzing global trade, we find the trade war to be the main factor impacting global imports and exports. However, there are also a number of events and trends that are having a strategic impact:
- A regionalization process coupled with a modification of global value chains
- Rise of e-commerce
- Greater participation of Asia today and growth prospects in the future
- Higher volume of trade in services and higher growth rate than that of goods
El regionalization process One of its causes is the growing uncertainty generated by various factors, including wars, the China-US trade conflict, and the disruption of logistical supplies during and after the pandemic. The need for Nearshoring and Friend Sharing has arisen, defined simply as the relocation of factories to nearby or friendly countries. Winning from this process are countries like Mexico in the Americas and Vietnam in Asia.
It's only natural to be surprised by the news that Amazon has acquired one million robots for its e-commerce ordering and purchasing system, drone delivery, and observing statistics on the increase in e-commerce purchases. The first major phase of e-commerce was a tsunami that found the private and public sectors poorly prepared for logistics. Now, exponential growth is expected, with the private sector better prepared, but the public sector still lagging far behind in this process. Post offices, customs, and the areas that regulate these matters appear to be global observers of a transformation in which they are secondary but necessary players. All forecasts point to accelerated growth.
To cite some data on this subject:
El retail e-commerce (B2C) will have sustained growth 8% per year over the next few years
According to some more optimistic estimates, the sector as a whole could grow by up to 15% per year enjoyed between 2025 and 2032.
En B2B-Profile, the value of e-commerce already exceeds USD 27 trillion and continues to expand at double-digit rates. Here are some data on this:
Another aspect of the scenario that has changed is Asia's participation. At the beginning of the century, it had only two countries among the top 10 exporters in the ranking. Today, it has four (China, Japan, Korea, Hong Kong), and number one, China, is expected to export twice as much as the second-largest, the United States, by 1.
More than 40% of global goods trade is Asian, and some predict it will account for half of all trade within 10 years.
But the world doesn't live on goods alone. Services have taken a path of greater growth than goods and have seen faster productivity growth. Countries that focus on services eliminate the logistics factor that so ties down goods exporters. A rise in oil prices due to war or trade conflicts has a significant impact on freight and the exchange of goods, but nothing on the exchange of services. One way to reduce logistical barriers to exporting more is to sell more services to the world, and some countries have adopted this strategy and are working through regulations and government to strengthen these sectors.
At the beginning of the century, services accounted for 10% of trade in goods; they have reached 33%, and are expected to be half that amount by 2030.
The uncertainty caused by the trade war
Trump attacks with tariff increases and then modifies them on the fly, generating even more uncertainty. Countermoves and truces are reshaping global trade and making decisions difficult. The US is the world's largest importer, and its tariffs—higher or lower—mean significant amounts of money for the global economy.
Since his first presidency, Donald Trump used the customs tariffs as a geopolitical weapon, particularly against China, but also against strategic allies. The level of tariffs applied during his first administration was much lower than those currently in place.
To highlight the chronological development of this tariff and geopolitical conflict, we highlight that during Trump's first term, he imposed tariffs on more than $350.000 billion in Chinese goods, and China responded with similar measures. Global trade suffered, growing at a slower pace.
Under the Biden administration, only a few measures are being relaxed, and a phase of strategic bans, primarily on semiconductors, is beginning.
In February, Trump imposed a 10% tariff on China and a 25% tariff on Mexico and Canada, its two main trading partners. Two days later, he suspended the measures against Mexico and Canada.
On March 4, the United States added 10% to its tariffs on China (reaching 20%), and Asians responded with 15% on agricultural products, which are their largest purchasers from Americans. The United States also raised tariffs on cars.
Although the most impactful moment in this entire process was on April 2, when, through a grand announcement, it imposed tariffs of 34% on China, 20% on Europe, and up to 90% on countries like Vietnam, on what they called "Liberation Day." Two days later, China announced a 34% tariff on the US and began a vigorous escalation. On April 9, China implemented an 84% tariff, and so did the US, reaching a total of 104%. The stock markets are feeling the impact, and the outlook for global trade is poor.
The final stage came after a 125% tariff imposed by China and the truce signed in Switzerland, a period that will expire on August 10 and reduced tariffs to just 30% and 10%.
First Results
These changes have led to increased uncertainty, which has led to a drop in stock markets, suspension of investments, and a sharp increase in freight rates. International organizations and consulting firms are forecasting a decline in global trade; for example, the World Trade Organization (WTO) estimates a 0,2% drop.
The increase in global freight rates was due to all shipping lines prioritizing shipments from China to the United States to arrive before the end of the truce, which will be mid-August.
This had an impact on all global trade, and the Iran-Israel conflict also increased the price of oil.
Uncertainty clearly prevailed on the global stage, because no one can be sure what will happen after August 10th. There are three possible paths: maintaining the truce agreement, returning to the initial situation in early 2025 with lower tariffs, or returning to the incredible levels of 125% and 145%. Anything is possible in the international business arena.
Trump bases his measures on the enormous trade deficit between the two countries. It amounts to $295.000 billion annually. China sells a lot and buys little. Furthermore, China sells technological inputs, toys, and clothing, while buying raw materials (oil, soybeans, etc.). A strategic aspect of this trade is that China can buy from other countries what it buys from the United States, but Americans cannot buy from other countries what they buy from China—much less at those prices.
The 10 effects of the trade war on the global economy
The most significant effect of the trade war is the slowdown in global trade, which the WTO estimates at 0,2%, but which could be even more profound following the truce period established by both countries.
🔴The second effect is the reconfiguration of value chains:
- Companies move production out of China (Vietnam, Mexico, India).
- New logistics hubs emerge as a result of the nearshoring y friendshoring.
Rising prices in the United States, generating inflationary pressure, lower competitiveness in its exports, and a need for the Federal Reserve to adjust the interest rate, could have global effects, given the importance of that rate in global investments.
Uncertainty is not good for the flow of Foreign Direct Investment (FDI); it is suspended or even canceled. The world is coming out of periods where FDI has been fragile and declining, so the establishment of new projects may be affected by the trade war.
🔴The fifth effect is a technological and strategic war in semiconductors, 5G, artificial intelligence, and rare earths. Behind the tariffs, there is also a restriction on delivering essential goods to the rival in this struggle, which is not exclusively economic.
The other five ramifications of the trade war are:
🔴New industrial strategies from leading countries reinforce policies on critical minerals and key inputs.
🔴A sectoral impact in the United States and other countries, such as retaliation against China's soybean purchases
🔴Increasing financial volatility. In times of uncertainty, we observe a "Fly to Quality," a shift toward safer assets. This always occurs in times of uncertainty, where less traditional markets lose appeal. One measure of this is the increase in gold value.
🔴Redistribution of international trade, as friendly or nearby countries may benefit from increased purchases or investments. Mexico, Canada, or Vietnam could benefit.
The WTO and its system for negotiating and working on trade disputes are weakening and losing operational capacity. These disputes, even if resolved or adjudicated within two years, are ineffective.
Conclusions
A trade war never has global benefits. Some countries or sectors may benefit by gaining a new market, but a decline in global trade is the logical outcome. A world with less trade and investment is one with less growth and development. If the economy declines, pressures on taxes and protectionist practices increase. It can all end in a vicious cycle.
Trump's idea of reindustrializing the United States may be difficult to implement and achieve. The United States is more competitive exporting services to the world than goods.
Two effects could be observed: on the one hand, the Latin American exporters They could benefit from replacing Chinese or Brazilian products (e.g., Colombian coffee, Argentinian meat, Mexican juices).
On the other hand, a greater regionalization, which is why the countries in our region should plan accordingly. 🤝
The author is a Specialist in International Trade and holds a Master's degree in Tax Administration and Public Finance, with a solid academic background and extensive experience in foreign trade and customs policies. He teaches at the National University of Córdoba (UNC) and the Catholic University of Córdoba (UCC), where he lectures on courses related to international trade and trade facilitation. He is also an accredited expert of the World Customs Organization (WCO) and a specialist in trade facilitation.
