Projections for Global Trade in 2025 Under the New Tariff Landscape

Introduction

Global trade reached a historic $33 trillion in 2024, driven by a 7% surge in services and modest growth in goods.

However, the outlook for 2025 is clouded by unprecedented tariff escalations, particularly the Trump administration’s 10–25% tariffs on imports from China, Canada, and Mexico, alongside expansions of Section 232 steel and aluminum tariffs.

FAF projects that these measures will shrink global trade volumes, disrupt supply chains, and trigger retaliatory actions, though high-growth sectors like ICT services, apparel, and regionalized automotive manufacturing may offset some declines.

The 2025 Tariff Landscape and Its Macroeconomic Implications

Unprecedented Scope of New Tariffs

President Trump’s February 2025 executive orders imposed sweeping tariffs

25% on all imports from Mexico and Canada (excluding energy resources taxed at 10%).

10% on Chinese imports, with an end to de minimis exemptions for low-value shipments.

Expanded Section 232 tariffs on steel (25%) and aluminum (25%, up from 10%), covering $72.8 billion in additional imports.

25% tariffs on motor vehicles and parts (HTS codes 8703 and 8708), affecting $286.2 billion in 2024 imports.

These measures target 44% of U.S. imports ($1.4 trillion in goods), making them the broadest tariff expansion in modern history.

The Tax Foundation estimates they will reduce U.S. GDP by 0.5% in 2025, eliminate 452,000 jobs, and increase federal revenue by $1.59 trillion through 2034 on a static basis.

However, dynamic modeling accounting for retaliatory tariffs and supply chain disruptions suggests a deeper GDP contraction of 0.7–1.2%.

Sectoral Impacts: Industries Poised to Lead or Lag

Automotive and Manufacturing

Regionalization Amid Turmoil

The 25% tariffs on vehicles and parts will reshape North American supply chains.

While U.S. automakers imported $87 billion in vehicles and $64 billion in parts from Mexico in 2023, the tariffs incentivize nearshoring under USMCA rules.

S&P Global Mobility predicts a 15–20% decline in cross-border automotive trade but a 12% rise in U.S. domestic production as firms relocate assembly lines.

However, consumer prices for vehicles could rise by 8–12% due to higher input costs.

ICT Services and Apparel: Resilient Growth Drivers

UNCTAD identifies ICT services (+13% in Q3 2024) and apparel (+14%) as high-growth sectors likely to sustain momentum in 2025.

Digital services, including AI-driven logistics and cloud computing, are less tariff-exposed and benefit from stable demand in developed economies.

Asian apparel exporters like Vietnam and Bangladesh may gain market share as U.S. retailers shift orders from China.

Energy and Critical Minerals: Targeted Exemptions

Canada’s energy exports (HTS codes 2709–2716) face only 10% tariffs, preserving $120 billion in annual trade.

This exemption supports North American energy integration but leaves non-exempt sectors like Canadian aluminum (facing 25% tariffs) vulnerable.

Pharmaceuticals and Semiconductors: Strategic Vulnerabilities

Trump’s proposed 25% tariffs on semiconductors and pharmaceuticals threaten $98 billion in annual imports.

With 80% of U.S. generic drugs sourced overseas, drug prices could rise 6–9%, exacerbating healthcare inflation.

Chipmakers like Intel and TSMC may accelerate U.S. fab investments to avoid tariffs, but short-term shortages are likely.

Regional Trade Dynamics and Retaliation Risks

North America: USMCA Under Strain

The U.S., Canada, and Mexico traded $1.6 trillion in goods in 2023, but tariffs could reduce this by 18–22% in 2025.

Canada has announced retaliatory tariffs on $12.4 billion in U.S. exports, targeting agriculture and machinery, while Mexico plans duties on U.S. corn and pork.

BCG estimates a 1.2% GDP contraction in Canada and 1.8% in Mexico if tariffs persist.

China: Decoupling Accelerates

China’s 10–15% retaliatory tariffs on $21.2 billion of U.S. exports will further divert trade to ASEAN and EU markets.

UNCTAD notes a 5% decline in U.S.-China goods trade in Q3 2024, with semiconductors and rare earths flows dropping 14%.

However, Chinese EV exports remain insulated by existing 102.5% U.S. tariffs.

EU and Africa: Emerging Opportunities

The EU’s goods exports to the U.S. grew 4% in 2024, and further gains are likely as firms like BMW and Siemens expand U.S. production to bypass tariffs.

Meanwhile, Africa’s exports, led by South Africa (minerals) and Kenya (apparel), are projected to grow 6% in 2025, capitalizing on AGOA trade preferences.

Projected Global Trade Volume for 2025

FAF diverge on 2025 trade projections

Pessimistic Scenario (Oxford Economics)

A 1.5–2.0% decline to $32.3–32.7 trillion, assuming full tariff implementation and retaliation.

Baseline Scenario (UNCTAD)

1.2–1.8% growth to $33.4–33.6 trillion, driven by services and ICT.

Optimistic Scenario (S&P Global)

2.0–2.5% growth to $33.7–34.0 trillion if tariffs are scaled back mid-2025.

The variance underscores dependence on U.S. policy stability. For every month the 25% tariffs remain, global trade loses $45–60 billion in value.

Conclusion

Navigating a Fragmented Future

The 2025 tariff regime marks a pivotal shift toward protectionism, with the U.S. risking $1.4 trillion in import costs to reshore manufacturing.

While ICT, apparel, and regional automotive sectors may thrive, broader trade growth hinges on de-escalation.

Businesses must prioritize supply chain agility, leveraging AI-driven logistics and nearshoring to mitigate tariff impacts.

As UNCTAD warns, prolonged uncertainty could reduce 2025 trade growth by 1.5 percentage points, making adaptive strategies critical.