Donald Trump has never been shy about his preferred economic weapon. In his pre-Christmas address to the nation, the US president reiterated that tariffs remain central to his vision for American prosperity.
While proponents argue that tariffs will revitalize domestic industries, raise wages and restore economic sovereignty, critics remain unconvinced. What is undisputed, however, is that Trump’s tariff regime has already reshaped the global economy and will continue to do so well into 2026.
According to the International Monetary Fund (IMF), the cumulative effect of tariff measures is one of the main reasons why global growth is expected to slow to 3.1 percent in 2026, compared to a pre-COVID average of 3.7 percent. A year ago, the IMF had expected global growth of 3.3 percent.
Kristalina Georgieva, the IMF’s managing director, described the situation as “better than we feared, worse than it needs to be.” Although a full-scale trade war has been avoided, growth remains too weak to meet rising expectations for living standards, employment and economic security.
Maurice Obstfeld, a former IMF chief economist and now at the Peterson Institute for International Economics, argues that the damage from the tariffs was largely contained because most countries avoided aggressive retaliation.
China was the notable exception, and even there the US quickly softened its stance following strong countermeasures from Beijing. “We avoided a trade catastrophe,” says Obstfeld. “But in the end we still had more trade restrictions than when Trump returned to office.”
Five rounds of talks later, tariffs and trade barriers between the world’s two largest economies remain at their highest in recent history, creating enduring tensions in global supply chains.
Rather than triggering an immediate downturn, tariffs have gradually increased costs and uncertainty for businesses. Planning long-term investments has become more difficult, while companies are constantly exposed to the risk that exceptions or rules may change overnight.
Ironically, the many loopholes in US tariffs have mitigated their economic impact, but at the expense of predictability. “Exemptions lower the effective tariff rate,” notes Obstfeld, “but they also create a lot of uncertainty about who is eligible and for how long.”
This explains why the United Nations Conference on Trade and Development (UNCTAD) estimates that global trade still grew 7 percent last year, reaching more than $35 trillion. Lower interest rates, a weaker dollar, creative supply chain workarounds and selective tariff exemptions have all played a role.
The US economy has so far weathered much of the disruption unscathed. Growth reached 4.3 percent between July and September, the strongest pace in two years, supported by consumer spending and massive investment in artificial intelligence.
Aditya Bhave, senior economist at Bank of America, believes the U.S. remains “very resilient” but warns that tariffs have likely increased inflation by half a percentage point. With consumption accounting for more than a quarter of global GDP, any slowdown in U.S. spending would have global consequences.
Otherwise, inflation trends are mixed. The euro zone has stabilized near the 2.1 percent target, while the UK and US remain above central bank comfort levels, keeping pressure on household finances and interest rate policy.
Several trouble spots are looming in the coming year. The renegotiation of the USMCA trade deal, the EU’s ratification of a long-delayed South American deal and a US Supreme Court ruling on the legality of Trump’s tariffs could all alter trade flows.
Energy prices will also play a crucial role. Goldman Sachs expects Brent crude oil prices to fall by around 8 percent this year, easing inflationary pressures. A gradual reopening of Red Sea shipping routes could further reduce global transport costs, although risks remain high.
China continues to cast a long shadow. Trade between Beijing and Washington fell for a third straight day in 2025, and tensions over rare earths, semiconductors and industrial overcapacity remain unresolved.
James Zimmerman, chairman of the American Chamber of Commerce in China, says expectations for progress at a planned Trump-Xi summit in April are “low” but continued dialogue is essential. “Beijing wants a fair chance to compete,” he says, “but the overemphasis on security concerns creates deep mistrust on both sides.”
Despite bold rhetoric about reindustrialization, U.S. manufacturing employment has remained little changed, falling to just under 12.7 million. Nevertheless, the tariffs remain politically anchored.
Obstfeld argues that the U.S. economy has grown despite tariffs, not because of them, thanks to consumer resilience and the AI investment boom. Nevertheless, he sees no signs of a turnaround in politics.
“Tariffs are not going away,” he says. “They will remain a central part of economic policy and political debate.”
In 2026, the global economy is unlikely to collapse under the weight of tariffs, but it will continue to bend, fragment and adapt around them, with uncertainty now the defining feature of global trade.
