How Trump’s Trade Disruption Is Forcing a Global Economic Reset
President Trump’s recent policy onslaught—particularly the flipflops on tariffs—has drawn sharp criticism from economists and market participants alike. The chaos inflicted on global supply chains, trade flows, and investor sentiment has been profound. Yet amidst the short-term volatility, there is a more consequential transformation quietly taking shape. From Beijing to Brussels and Brasília, countries and regions are rapidly rewiring their economic strategies—not merely to resist renewed American protectionism but to reimagine their roles in a more multipolar, less US-centric global economy. This is not just a story of resilience. It’s one of renewal.

China: A Nudge Toward Consumption-Led Growth
For years, China has sought to pivot away from its heavy dependence on export-driven manufacturing. Ironically, Trump’s trade aggression may be doing Beijing a favour by hastening that shift.

The loss of access to US market has forced Chinese policymakers to accelerate stimulus aimed at propelling up domestic demand. Earlier this year, China unveiled a multi-pronged package, which included direct cash transfers to households, tax rebates on electric vehicles, and infrastructure spending focused on urban renewal and green technologies. These efforts are beginning to show results. Retail sales rose 6.8% in Q1, and the services sector now accounts for more than 55% of GDP, a record high.

What’s more, China’s engagement with trading partners beyond the US is deepening. A surprise EU-China summit planned for July—focused on electric vehicle supply chains—signals a renewed willingness to cooperate on strategic industries. Despite past tensions, both sides appear more pragmatic in the face of US unpredictability.

Europe: Turning Inward and Outward at Once
In Brussels, Trump’s protectionist crusade has reignited some old questions: Is Europe too reliant on transatlantic trade? Is its economic model too inward-looking?

The European Commission is wasting no time in finding a concrete answer to those questions. President Ursula von der Leyen recently highlighted that the EU is actively pursuing trade relationships with countries that make up the other 87% of global trade (the balance of 13% being the US). Talks have accelerated with India, Malaysia, the UAE, Indonesia, and Thailand. Currently, 45% of EU external trade is covered by FTAs. If current negotiations succeed, that figure could grow by another €185 billion.

Simultaneously, the EU is revisiting its internal constraints. There’s growing acceptance that post-pandemic fiscal rules must evolve. Germany and France are tentatively backing reform of the Stability and Growth Pact to permit more strategic investment—particularly in defense, energy security, and digital transformation. The goal is not just protection from US volatility, but a more dynamic, autonomous Europe.

One of the boldest moves as part of those initiatives lies in Latin America. The long-delayed EU-Mercosur deal is back in focus. If ratified, the agreement would connect the EU with a Latin American market of 780 million people. Tariffs would fall on everything from pharmaceuticals to beef, and sustainability clauses would ensure alignment with Europe’s green agenda. In an era of geopolitical uncertainty, the EU is setting the tone for value-based trade.

Asia: The Dawn of Regional Self-Reliance
Asia is perhaps the most profoundly affected region—and the most proactive in response.
Trump’s abandonment of the Trans-Pacific Partnership in 2017 had left a vacuum. That void is now being filled by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which links 11 economies from Australia to Canada. CPTPP is now gaining momentum as a vehicle for regulatory alignment, market access, and geopolitical hedging. New Zealand has proposed extending the pact’s scope via partnership with the EU, potentially creating a vast bloc of like-minded economies committed to rules-based trade.

At the same time, the Regional Comprehensive Economic Partnership (RCEP)—a 15-country trade pact including China, Japan, South Korea, and ASEAN—has become increasingly relevant. Encompassing nearly a third of global GDP and 2.3 billion people, the RCEP is helping smaller economies such as the Philippines integrate more deeply into Asian supply chains.

In a striking shift, the Philippines has initiated trilateral talks with both China and Japan on infrastructure, digital trade, and supply chain diversification. While tensions in the South China Sea persist, economic pragmatism is prevailing. Quiet diplomacy is facilitating cooperation in semiconductors, agritech, and green tech—sectors where all concerned parties see mutual benefit.

Meanwhile, ASEAN economies are forging ahead with intra-regional integration. Singapore, Indonesia, and Thailand are leading efforts to pilot digital trade corridors and regional payment systems. These efforts, once long-term goals, have taken on new urgency in response to global supply chain shocks and shifting US policy.

Latin America: A Pivot Beyond the Gulf
For Latin America, Trump’s transactional stance on geopolitics has been a catalyst for diversification. No longer content with overreliance on US trade, the region is turning toward Asia and Europe for trade opportunities.

Brazil has ramped up efforts to secure trade agreements with India and deepen cooperation with the UAE, targeting investment in agribusiness and energy. Chile is leveraging its lithium and copper resources to engage with Asian and European buyers tied to the global green transition. Mexico, traditionally the most tightly bound to US supply chains, is expanding trade and investment discussions with Japan, Korea, and the UK.

Mercosur—long criticised for stagnation—is awakening. The revival of the EU-Mercosur deal could serve as a geopolitical pivot point, allowing the bloc to attract new partners and modernise its regulatory framework. For a region often left out of the global trade narrative, the disruption caused by Trump’s policies may be delivering long-overdue momentum.

Global Trade: From Fragility to Flexibility
At a macro level, what is unfolding is the slow but steady unwinding of the hyper-globalised model of the early 2000s. Trade is not collapsing—but it is evolving.

Gary Dugan - Investment Committee Member

Bill O'Neill - Non-Executive Director & Investor Committee Chairman

17th Apri 2025

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