On April 2, U.S. President Donald Trump announced a sweeping set of tariffs, proclaiming they would enter in a new era of American economic strength. The announcement sent shockwaves through the global economy, as the tariffs were applied indiscriminately — affecting every nation on Earth (bar Russia). No corner of the world was spared: even the Heard Island and McDonald Islands, a remote Australian territory in the southern Indian Ocean inhabited by penguins and seals, were slapped with a 10% tariff. According to the Australian prime minister, Anthony Albanese: “Nowhere on Earth is safe.”

While the newly imposed U.S. tariffs have affected many countries, China’s original tariff rate of 145% stood out – making it a particularly curious case to examine. We will also take a closer look at what the imposed tariffs mean for the European Union—an economy for which Trump’s slapped rate of 20% is still high for the interconnectedness of transatlantic trade. But despite this, recent revelations during the past week have shown an easing of such confrontations—signalling a willingness from Washington to reach new deals. But the question remains as to whether such sudden shifts in Trump’s attitude will be enough to settle Brussel’s and Beijing’s worries long-term.

According to the White House, the main reason for having implemented tariffs was the following:  ‘President Trump refuses to let the United States be taken advantage of and believes that tariffs are necessary to ensure fair trade, protect American workers, and reduce the trade deficit—this is an emergency.’ 

For the outcome of the original trade policy, here is an overview of the key pre-May Tariff Rates by country, for some of the larger economies affected:

• China: An effective tariff rate of 145%, combining previous and recent levies.
• Vietnam: 46%
• Sri Lanka: 44%
• Bangladesh: 37%
• Thailand: 36%
• Taiwan: 32%
• Indonesia: 32%
• Switzerland: 31%
• South Africa: 30%
• Pakistan: 29%
• India: 26%
• South Korea: 25%
• Japan: 24%
• European Union: 20%
• Israel: 17%
• Australia: 10%
• United Kingdom: 10%
• Singapore: 10%

For almost all other countries, a base tariff rate of 10% was imposed.

Why the U.S. Targeted China Most?

Trump’s tariffs have brought havoc to the global economic market, exemplified by the sheer volatility of investors’ decisions on financial markets over the past few months. Although being one of the main targets of this havoc from Trump, China has been able to find new trading partners in Europe, who fled Trump’s destructive economic policies. As it stands, China received the highest tariff rate, an effective 145% due to long-standing trade tensions with the United States. Trump officials have cited a range of issues, including intellectual property theft, state subsidies to Chinese industries, forced technology transfers, and a persistent trade imbalance. The exceptionally high rate reflects Washington’s intent to pressure Beijing into structural economic reforms and reduce its dominance in key manufacturing sectors. The move undoubtedly signalled  a hardline approach, aiming not just to curb imports but to fundamentally reshape the U.S.-China trade relationship.

In response, China hiked its own tariffs on American goods to 125%, which had effectively frozen all trade between the two countries in recent weeks as shipments of Chinese goods to the United States have plunged. The slowdown of shipments is predicted to lead to massive shortages, as in the wake of tariffs, cargo at the Port of LA was down 35%. On top of the American economy shrinking, Chinese factories were hit with the steepest slowdown in activity in more than a year. 

With the increased tension between the U.S and China, the latter has already found potential new partners in the EU, who have also been at the receiving end of Trump’s tariffs. In early May, President Xi Jinping said China was ready to work with European Union leaders to expand mutual openness and properly handle frictions and differences. Seemingly referring to the United States, Lin, the Chinese ministry spokesperson, told reporters. “Under the current circumstances, both sides believe it is very important for China and Europe to strengthen dialogue and cooperation.”

The escalating trade war between the United States and China had not only disrupted the global supply chain but has equally begun shifting China more towards the EU. While the U.S. economy faces challenges with rising costs and the potential for shortages, China is looking beyond its strained relationship with Washington. The warming of ties between China and the European Union signals a strategic pivot, as China seeks new partnerships to mitigate the impacts of U.S. tariffs. This shift highlights the increasing importance of global alliances in the face of protectionist policies, underscoring that the trade tensions are likely to have far-reaching consequences that extend beyond just the U.S.-China dynamic.

But in a sudden turn of events just a few days ago, on May 12th, the US and China agreed to temporarily suspend most tariffs for 90 days following diplomatic talks between both countries in Switzerland. As it now stands, both countries will cut tariff rates from 125% to 10%. But while the move has been described as a dramatic de-escalation, there is no evidence that the settling may give way to a lasting thaw of relations—not least considering the volatility of decisions that have marred the beginning of Trump’s second administration. And even if a lasting truce does endure, the memory of yet another high-stakes trade confrontation may equally push China to seek closer ties with a more predictable partner like the EU. Let us not forget: while tariffs have gone down, they still remain at record high figures.

Similarly for the EU, as Trump sends a letter to the European Commission on May 14th that signals a willingness to reach a deal, the decaying of transatlantic relations over the last few months will likely not be forgotten. The EU will most likely remain wary of future relations with the US.

Economic Implications for China pre-truce

Just to give an idea of what the global economy had to face over the last few months, the latest round of U.S. tariffs pre-truce on $18 billion of Chinese imports, from EVs to semiconductors conductors, had sent ripples across international markets, accelerating a fragmented trade landscape. While the Biden administration framed the measures as “protecting American industries,” analysts warned of unintended consequences: supply chain disruptions, inflationary pressures, and a potential realignment of alliances. As Nuno Dias Pereira notes in EuroProspects, such tariffs, even if now lowered, could backfire, creating a “strategic opportunity” for China to deepen ties with Europe while the U.S. risks isolation. 

The Domino Effect

As Bruegel’s analysis highlights, the tariffs may inadvertently push EU nations towards China, particularly in green technology sectors where Beijing dominates supply chains. Carnegie Europe’s experts warn of a “strategic dilemma”: Should Europe decouple from China to align with the U.S., or hedge its bets? 

Faced with the US’ unpredictability, countries are scrambling to adapt:

• Germany is accelerating talks with Asian partners to secure critical minerals.
• Italy faces pressure to exit China’s Belt and Road Initiative—or double down.
• Eastern EU states are lobbying Brussels for stronger trade protections.