Resilient but reshaped: Global trade adapts to Trump tariffs and AI boom

Global trade has proven far more resilient than expected despite tariff pressures linked to Donald Trump, according to a new report by the McKinsey Global Institute.

While many had anticipated a sharp downturn in 2025, the report finds that trade flows did not collapse, instead, they evolved in complex and uneven ways. Some shifts, such as a surge in US imports ahead of tariff hikes, appear temporary. Others, including the decline in direct trade between the United States and China, are likely to persist.

One of the most notable trends is the growing role of geopolitics in shaping trade routes. Exchanges increasingly occur between “geopolitically aligned” partners, even if they are geographically distant. At the same time, the European Union has lost market share in China, while India has expanded its global trade footprint, particularly through rising smartphone exports to the US.

Artificial intelligence has emerged as a key driver of global trade growth. Shipments of semiconductors and data center equipment surged sharply between 2024 and 2025, accounting for a significant share of overall trade expansion. Countries such as Taiwan, South Korea, and several Southeast Asian economies have benefited from increased exports of AI-related products to the US.

Meanwhile, China has reinforced its position as a “factory for factories,” shifting focus from direct exports to supplying components and equipment to third countries. These countries, in turn, often export finished goods to the US, effectively reshaping supply chains rather than breaking them.

Tariffs have nonetheless triggered major adjustments. Direct US-China trade fell significantly in 2025, but much of the gap was filled by imports from alternative markets. Chinese exporters responded by lowering prices and seeking new destinations, contributing to a rise in exports from Southeast Asia. European companies, however, have faced mounting pressure from both US tariffs and redirected Chinese trade flows.

Despite ongoing tensions, the report suggests that the global trading system has remained stable partly because US policy rhetoric has been harsher than actual measures. Experts, including Richard Baldwin of IMD, note that the absence of large-scale retaliatory actions has helped prevent a broader breakdown.

However, structural challenges remain. China’s export-driven strategy, geopolitical risks, and potential disruptions to energy supplies continue to cast uncertainty over future trade dynamics.

The report concludes that while the global economy demonstrates strong resilience, it is entering a period of transformation, with no clear global leader emerging to shape the next phase of international trade.