The global trade landscape in 2025 is getting more complex, unpredictable, and full of shifting policies, particularly when it comes to tariffs.
Changes in trade rules, climate concerns, and rapid advancements in digital technology— especially ones that are powered by genAI and agentic AI solutions, are reshaping how countries and businesses interact globally.
The Evolving Global Trade Landscape
Different parts of the world are taking different approaches to trade. While the European Union (EU) remains committed to open, rules-based trade, the United States is leaning toward protectionism with new tariffs on specific trades. There are also different opinions towards tariffs, with some economists viewing it as a risky tool potentially harmful to consumers and the global economy, and others seeing it as having a limited role in specific circumstances.
With these changes and ways of approaching them, increased complexity and unpredictability could severely impact the geopolitical landscape. Commissioner Šefčovič, in his address to the EU parliament, notes, “Europe faces an increasingly complex world, marked by – among other things – rivalry and unpredictability that impacts our trade relations around the world.”
World Trade Organization and Global Trade
Whether we realize it or not, international trade impacts each and every one of us. While it’s easy to think of these things as abstract concepts, they have very real consequences for people’s jobs, the prices they pay, and their overall quality of life.
In this 21st-century marathon, the 20th-century rulebook might no longer fully apply. While the World Trade Organization (WTO) helps ensure trade happens fairly and transparently, some of its rules may need revamping to reflect today’s realities.
The WTO’s clear trading rulebook is the foundation for trade to work. If businesses constantly guess the rules, they won’t feel confident enough to invest in trading across borders. It’s like trying to play a game where one doesn’t know what the points are worth. This creates uncertainty, which makes businesses hesitate and, as a result, slows down the global economy.
Some of the areas where the WTO rule book needs to be modernized are digital trade, e-commerce, the role of state-owned enterprises, and climate change.
Using Trade as a Tool to Push for a Greener Future
Trade also plays a crucial role in sustainability. Take electric cars, for example—their production depends on a global supply chain of responsibly sourced materials. But not many owners are thinking about this. To fully push for a greener future, it should not only be about acquiring the materials but also about how they are acquired, preferably in an ethical and sustainable manner. Remember that balancing open trade with environmental responsibility is becoming increasingly important.
How do we square the need for free and open trade with the urgent need to reduce carbon emissions?
The Coalition of Trade Ministers on Climate is working on ways to make trade part of the climate solution rather than a problem. Instead of acting as an obstacle, trade can be an asset to support climate goals. However, this is not a simple matter. Some people worry that globalization may lead to a “race to the bottom,” where companies seek out countries with the least strict environmental standards to cut costs. This practice undermines global efforts to combat climate change.
The challenge is to strike a balance between promoting trade policies that support environmental goals and ensuring companies do not exploit regulatory loopholes for profit. By prioritizing sustainability in trade agreements and enforcing stricter environmental regulations, trade can become a tool for long-term environmental progress rather than a source of harm.
With the USA retreating from climate diplomacy, the EU may need to give this initiative an extra push and take on a bigger role. Trade could facilitate the sharing of clean technologies and promote environmentally friendly practices across borders. Sustainability is not just an environmental issue; it could also become a geopolitical advantage, a driver of innovation, and a foundation for long-term economic power.
The Impact of Tariffs
The US president imposed a hefty 25% tariff on imported steel and aluminum on key trading partners like Canada and Mexico which is causing concern, especially for industries like automotive, and could have wider repercussions. Harvard economist Dani Rodrik argues for a more nuanced approach to globalization and industrial policy, emphasizing the need to rebuild the middle class through a focus on creating good jobs in the service sector.
Why are tariffs the talk of the world these days?
The economies of the world regions are so deeply intertwined that any big shock to one is inevitably going to affect the other. Their trade and investment ties are so complex that they might create a chain reaction that could affect businesses and consumers beyond the borders of a region.
Jim Farley, the CEO of Ford said that a 25% tariff on imports from Mexico and Canada would be devastating to the US auto industry. Some of the numbers in the same article by Supply Chain Dive, are pretty eye-opening. The article says 76% of vehicles manufactured in Mexico and 93% of those made in Canada are imported into the US. Ford alone, built almost 230,000 vehicles in Mexico in 2024.
The ripple effects of tariffs can spread through every sector of the economy. How many products cross borders every day: raw materials, finished goods, food, technology, the list goes on and on? This really highlights how interconnected everything is. Tariffs could be mini earthquakes that shake the entire system, and sometimes, those tremors can trigger a whole cascade of consequences that nobody sees coming.
Tariffs on steel and aluminum might protect some domestic producers in the short run, but when those costs are passed down to the manufacturers who use those materials, they will be forced to raise their prices and become less competitive globally. This might just lead to everyone paying more at the checkout. Tariffs can also lead to other countries hitting back with their own retaliatory measures, further raising the prices of the finished goods.
The big question: How Do We Build a Global Trading System that is Both Fair and Effective?
To build a more stable and equitable global trading system, countries and businesses could:
- Embrace a collaborative approach, recognizing that global trade is a shared endeavor, not a zero-sum game. Prioritize finding solutions that benefit everyone, not just a select few.
- Engage in open and transparent dialogue to address legitimate concerns about protecting national interests and ensuring economic security, while also promoting free and open markets.
- Support the modernization and strengthening of international institutions like the WTO, to ensure they can effectively handle the complexities of today’s global economy.
- Integrate sustainability and environmental considerations into trade policies, using trade as a tool to combat climate change and promote responsible practices.
- Focus on building long-term partnerships and trust.
The key takeaway is that open communication and collaboration are essential for trade to flourish, and international forums can help with that. “Trade— like any business— thrives on predictability and fair rules. So, such revitalization is key to rebuilding trust and restoring collaboration between trading partners – and ultimately, the key to the effectiveness of the WTO,” said Šefčovič.
Finding the right balance between trade, sustainability, and economic security is crucial. By working together, countries can shape a trade system that supports both economic growth and a more sustainable future.
