What Happened to Trade Wars?

The phenomenon of 'Trade Wars,' primarily defined by the imposition of tariffs and non-tariff barriers between major economies, has persisted and evolved significantly up to August 2026. Initially gaining prominence with the US-China trade disputes in the late 2010s, these tensions have deepened and broadened, now encompassing critical technologies, supply chain resilience, and geopolitical competition.

Upon President Donald Trump's return to office in 2025, the US trade policy saw a renewed emphasis on protectionism. In February 2025, Trump announced sweeping tariffs on Canadian goods, including a 25% tariff on most imports and a 10% tariff on Canadian energy products, leading to Canadian retaliation. By April 2025, the average US tariff rate on Chinese goods briefly surged to 164% before declining through subsequent negotiations. A significant development in February 2026 saw the Supreme Court of the United States strike down several of Trump's emergency tariffs imposed under the International Emergency Economic Powers Act (IEEPA), prompting the administration to shift its legal basis for imposing duties, relying on statutes like Sections 232 and 301.

The 'chip war' or 'semiconductor trade war' has become a central front. By July 2026, the dynamic had shifted from a 'blockade' to a 'bazaar,' where export controls are used as bargaining chips. Since August 2025, Nvidia and AMD have been handing the US government 15% of their China chip revenue for export licenses. China, in turn, has weaponized its control over rare earths, suspending some export rules until November 2026 as part of trade truces. In January 2026, the US imposed a 25% tariff on a narrow set of advanced logic semiconductors, effective January 15, 2026, to protect national security and strengthen the domestic semiconductor industry. However, China has also begun blocking imports of US-approved advanced chips like the H200 in January 2026, steering demand towards domestic alternatives like Huawei.

Beyond semiconductors, the US has continued to implement and schedule tariffs. The Biden administration, in May 2024, directed increased Section 301 tariffs on $18 billion of Chinese imports, with some increases, such as on lithium-ion non-EV batteries, natural graphite, permanent magnets, and rubber medical gloves, taking effect in 2026. In August 2026, the US imposed a 12.5% replacement tariff on Chinese goods, along with 53 other countries, for failing to enforce prohibitions on forced labor imports. China has responded with its own countermeasures, including sanctioning American entities, tightening export reviews on drones, and suspending American inspection agencies from its product certification system in August 2026. China also launched investigations into US trade practices in March 2026, citing disruptions to global supply chains.

The global economic impact has been significant. Global trade growth is forecast to slow to 0.6% in 2026, down from 2% in 2025, with tariffs increasing and exporters absorbing more costs. The UN also projected global trade growth to slow to 2.2% in 2026, noting that the impact of higher tariffs would become more evident. The Tax Foundation estimated that the Trump tariffs would amount to an average tax increase of $900 per American household in 2026. There are also accusations, as of August 2026, that over 40 countries, including the EU, Mexico, Canada, India, Japan, and South Korea, are helping China evade US tariffs through transshipment, costing the US billions in revenue.

In Europe, the EU continues to navigate a challenging geopolitical environment. While EU countermeasures against US tariffs were suspended until August 6, 2026, further negotiations or renewed retaliatory measures remain possible. The EU has also been active in forging new trade agreements, concluding negotiations for a comprehensive free trade agreement with India in January 2026 and announcing the provisional implementation of a deal with Mercosur in May 2026. The WTO's dispute settlement system remains hampered by the paralysis of its Appellate Body, making the resolution of complex non-tariff barriers more challenging. Overall, geopolitical tensions have become the main global risk in 2026, overshadowing trade policy uncertainty and driving companies towards regionalization and diversification of supply chains.