On November 25, U.S. President-elect Donald Trump rattled international markets by announcing his plan to slap a 25-percent tariff on all goods America imports from Mexico and Canada and add “an additional 10-percent tariff, above any additional tariffs” on imports from China.

Just a day later, Trump doubled down on his tariff rollout by nominating Jamieson Greer, who played a key role in imposing tariffs on China during Trump’s first term, and who sees China as a “generational challenge” to the U.S., as the next U.S. trade representative.

When Trump resumes office on January 20, 2025, his implementation of these and other tariffs as a blunt instrument to reshape trade relationships is possibly going to upend the stability of global markets.

In addition to the opposition voiced by international counterparts, even within the U.S., skepticism regarding the announced tariffs is mounting. The Washington Post recently cautioned against Trump’s strategy, calling it “incredibly shortsighted.” The belief that the U.S. can isolate China and reap the benefits is wishful thinking.

The stakes are growing as Trump—and the world—prepares for his return to the White House. Taking a tariff-driven approach risks undermining global economic stability and harms the very interests it seeks to protect.

Eroding multinational trade

The economies of Canada, Mexico and the United States are tightly interwoven. Trump’s tariff policies threaten to rattle these decades of stable economic integration.

The U.S. market accounted for 75 percent of Canadian exports in 2023, including key sectors such as energy, agriculture and lumber. The imposition of U.S. tariffs could strain these industries and slow down the country’s economic growth.

Mexico faces an even greater challenge, with a staggering 83 percent of its exports heading to the U.S. Industries central to the Mexican economy—automobiles, electronics and agriculture—would take the brunt of heightened tariffs. This would impede the country’s growth and, in response, Mexico may impose retaliatory tariffs, escalating tensions and creating a vicious circle of trade disputes within North America.

Proponents claim the U.S. stands to gain benefits from these policies, with tariffs having the potential to help the resurgence of domestic manufacturing, bolster local industries and create jobs. But these gains are short-term only and come with huge costs. Elevated tariffs will inevitably be passed on to consumers, raising prices for everyday goods. Coupled with additional tariffs on Chinese imports, U.S. households could face mounting inflationary pressures, with their purchasing power eroded over time.

Trump’s tariff policies are also likely to have an impact beyond North America, disrupting global industrial chains. In an era of globalization, where global production and supply chains are inextricably connected, such disruptions might compel multinational corporations to overhaul their operations to dodge tariff risks.

Many export-driven economies are likely to remain passive in the face of U.S. tariff pressure. Retaliatory measures would escalate trade tensions, leading to tough consequences for consumers worldwide: higher prices, rising living costs and diminished economic certainty. Moreover, global investor confidence would deteriorate due to the unpredictability of U.S. trade policies, which can delay or halt critical investments and further stall economic growth.

The World Trade Organization, long considered the cornerstone of dispute resolution, may now face questions about its relevance and authority, as the use of tariffs as a unilateral weapon on such a large scale by the world’s leading economy severely undermines the established global trade rules.

Who suffers more?

Fearing that Trump may impose additional tariffs on Chinese goods, U.S. companies including Microsoft, HP and Dell are taking proactive measures, urging their Chinese suppliers to ramp up production. Microsoft, for instance, has called for increased manufacturing of cloud infrastructure components and accelerated the production of Xbox accessories and the assembly of as many Surface laptops as possible before Trump takes office.

The U.S. and China have built deeply interconnected economic ties over the past decades, in which cooperation benefits both and conflict harms both. The trade war between the countries, initiated by the U.S. and now in its sixth year, reveals that it is U.S. businesses and consumers who have suffered most from the tariffs on Chinese products. American companies, heavily reliant on Chinese imports for raw materials, components and intermediate goods, are suffering the effects of rising procurement costs and decreasing product competitiveness. U.S. consumers, in turn, have faced higher prices for daily goods, electronics and other necessities, which have driven up their living costs.

Furthermore, the U.S.’ global dominance over the past century has been closely tied to the hegemony of the dollar. In 1971, then Treasury Secretary John Connally famously told European finance ministers, “The dollar is our currency, but it’s your problem.” However, unchecked dollar supremacy has also come at a cost, contributing to the hollowing-out of U.S. industries.

Yet Trump, disregarding these realities, continues to use high tariffs as a tool to suppress other nations’ industries and attract investments to American manufacturing.

But the trade war has failed to deliver the blow to China’s economy that many U.S. politicians had envisioned. Despite its challenges, trade between the two nations has continued to grow. In the first three quarters of this year, total China-U.S. trade rose by 2.3 percent year on year.

In recent years, China has strategically adopted necessary measures to offset the negative impacts of the trade war. While China’s total annual exports grew by 6.2 percent to 18.62 trillion yuan ($3 trillion) since 2016, exports to the U.S. accounted for just 2.67 trillion yuan ($370 billion)—still a modest increase of 2.8 percent year on year. Exports to the U.S. now make up only 14 percent of China’s total exports, so even if the U.S. imposes additional tariffs on China next year, the impact on China may be limited.

For global businesses, the choice between investing in the U.S. or China comes down to practical benefits. For manufacturers, China remains the better option. It offers unparalleled industrial and supply chain ecosystems, a well-educated labor source, a vast consumer market, and lower operating costs. Products made in China enjoy a natural competitive edge over those manufactured in the U.S. This reality underpins the widespread opposition among international businesses to the U.S.’ aggressive tariff policies.

As the next U.S. administration signals its intention to increase tariffs, the global business community needs to act collectively to protect its interests. Over the coming four years, Trump’s tariff-driven agenda will likely remain a destabilizing force to globalization, undermining existing trade systems and reshaping the international economic landscape. The question remains: How much of this burden can the global economy, and the U.S. itself, endure?