Leading geopolitical analyst Dr Antonia Colibășanu examines the deeper socio-economic and security challenges and opportunities now facing nations and their traditional trading networks.*
The global economy is currently in a state of de-structuring rather than restructuring. US President Donald Trump’s wide-ranging programme of tariff increases has meant often frantic renegotiation of trade deals forcing nations to reconsider their national interests and priorities.
On 2 April 2025 (“Liberation Day”), US President Donald Trump declared a 10% across-the-board tariff on imports from all countries, targeting around 60 nations/blocs with whom the US had large trade deficits. A week later, the administration paused the full tariff increase for 90 days (leaving the 10% base in effect) to allow negotiations. Since then, a flurry of trade deals and negotiations has unfolded as the US seeks bilateral agreements to avert steeper tariffs. As they started to unfold, the global system as we know it ceased to exist.
These discussions are no longer solely about economic growth but are deeply intertwined with internal socio-economic stability and national security concerns. Each country is evaluating its strategic position based on its regional stance, critical infrastructure, and security needs, often without a clear, unified vision for the future.
The result is a fragmented approach to economic and security relations, where global and regional objectives do not align in any coherent way. At the time of writing the tariff programme is far from settled, its unpredictability diametrically opposed to secure trade.
The current status of trade dealing
This period of uncertainty and flux presents a unique opportunity for all players on the global stage to become creative in placing their own interests first.
This newfound autonomy allows countries to innovate in how they approach trade, diplomacy, and alliances, seeking more favourable terms or forging new partnerships.
However, as each player jockeys for position, this decentralisation inevitably leads to rising tension within the system. This tension is an inherent feature of the ongoing transition—an indication that while new possibilities are emerging, the process of navigating this shifting landscape will not be smooth.
This shifting dynamic makes it crucial for the business community to closely monitor the evolution of trade deals, as these renegotiations can significantly impact global markets. Companies must remain agile, not only to understand the immediate effects of new agreements but also to anticipate how these deals may reshape investment patterns and critical supply chains. As national priorities shift and new regional alliances form, businesses will need to adapt their strategies to navigate an increasingly fragmented and unpredictable economic landscape.
To help navigate this evolving landscape, here is a summary of where we stood at the time of writing with each trade deal that the US has started negotiating since April.
UNITED KINGDOM: The US and the UK are negotiating the Economic Prosperity Deal, which aims to strengthen trade between the two nations while addressing specific bilateral irritants. The deal focuses on agriculture, with the UK opening its market to more American beef, ethanol, and other farm products. It also targets automobiles, aerospace goods, and metals, such as steel and aluminium. The US has set a special tariff-rate quota for UK steel/aluminium exports and capped tariffs on UK-made autos at 10% for the first 100,000 vehicles, beyond which a 25% Section 232 auto tariff applies. This agreement seeks to bolster supply chain security and US manufacturing, giving American farmers and producers greater access to UK markets while offering the UK some tariff relief. The deal, initially announced on May 8, 2025, is still in the process of ratification on the UK side, with further negotiations ongoing, particularly concerning pharmaceuticals and long-term quotas. While it solidifies the US-UK partnership, challenges remain, including political opposition in both countries and the incomplete scope of the agreement, particularly concerning tariff reductions and specific sector negotiations. Without finalising these details, including the outcome of the US Section 232 investigation on pharmaceuticals, full ratification may face delays.
EUROPEAN UNION: The US and the EU are negotiating the Turnberry Framework Agreement, a trade deal aimed at reducing trade tensions and reshaping the transatlantic economic relationship. Under this framework, US tariffs on EU automobiles and pharmaceuticals will be capped at 15%, averting a previously threatened 30% tariff. Some goods, like aircraft, medicines, and select agricultural products, will see tariffs eliminated entirely. The deal also has the EU purchasing military technology and $750bn worth of US energy exports over three years, aiming to reduce its reliance on Russian energy, as well as a promise for investment in the US critical infrastructure. However, unresolved issues remain, including 50% US tariffs on EU steel and aluminium and the treatment of semiconductors and pharmaceuticals, which are still under investigation. The framework, announced in late July 2025, aims for full ratification by the end of the year, but many details are still to be ironed out. Politically, the agreement has faced backlash in Europe, with some leaders viewing it as a concession to US demands, while others worry about its economic impact, particularly the tariffs on key industries. Despite these challenges, the deal marks an effort to realign US-EU economic ties amidst growing competition with China and Russia.
JAPAN: The US and Japan have reached the Reciprocal Trade Framework, which aims to address key economic concerns and solidify their alliance. The US has set a 15% tariff on Japanese imports, down from the previously threatened 25%, with Japan agreeing to lower barriers on US automobile exports and agricultural products like rice. In return, Japan has pledged to invest $550bn in the US, particularly in high-tech manufacturing sectors such as semiconductors and electric vehicle supply chains. The agreement seeks to reduce the US-Japan trade deficit, strengthen manufacturing, and bolster US security by ensuring Japan’s contribution to critical industries. Japan’s objectives are to avoid the higher 25% tariff on autos and maintain stable access to the US market, while also reinforcing its security alliance with the US in the face of regional threats. The deal, announced in July 2025, is considered a framework, with further negotiations needed to finalise provisions on sectors like automobiles and ensure the $550bn investment materialises. However, the deal faces challenges, as both countries will need to manage internal political resistance and ensure that the deal’s terms are adhered to in the coming months.
INDONESIA: The US and Indonesia reached a landmark trade deal that opens nearly all of Indonesia’s markets to US goods and services while imposing a 19% tariff on Indonesian exports to the US. In exchange, Indonesia will eliminate tariffs on over 99% of US goods, including agricultural products, industrial goods, and digital services. Indonesia also agreed to remove non-tariff barriers, such as import licensing and local content rules. The deal is designed to strengthen economic ties between the two nations, with a focus on enhancing US supply chain resilience, particularly in critical minerals. For Indonesia, the objective is to avoid a 46% reciprocal tariff while attracting US investment. The deal is seen as a step towards reducing US dependence on China and integrating Indonesia into the US-led trade framework. The agreement’s success will depend on Indonesia’s ability to implement sweeping reforms and ensure that regulatory changes are enforced.
VIETNAM: In July 2025, the US and Vietnam reached a deal in which Vietnam’s imports to the US will face a 20% tariff, much lower than the 46% initially threatened. In exchange, Vietnam agreed to remove its tariff and non-tariff barriers on US goods, giving US agricultural products, machinery, and technology duty-free access to Vietnam’s market. This deal is part of the US’s broader strategy to reduce its trade deficit with Vietnam, integrate Vietnam into the US-led economic sphere, and secure a supply chain alternative to China. Vietnam’s objectives were to avoid the severe 46% tariff and maintain stable access to the US market, while also attracting US investment. Both sides must navigate challenges in enforcement and compliance with non-tariff commitments, with the potential for ongoing talks in late 2025 or early 2026 to formalise the agreement further.
INDIA: The US and India seem to remain in the process of negotiating a comprehensive bilateral trade agreement, covering sectors such as agriculture, manufacturing, digital trade, and pharmaceuticals. The US has been pushing for greater market access, particularly in farm goods, medical devices, and technology products, while India seeks to avoid steep tariffs on its major exports like textiles, IT services, and pharmaceuticals. A major challenge is India’s reluctance to open its agriculture and dairy markets, where it faces strong domestic opposition. Both countries share a strategic interest in reshoring critical supply chains and reducing dependence on China. At the same time, President Trump announced on 30 July that the US would impose a 25% tariff on all imports from India and “penalties” for India buying “a vast majority” of Russian military equipment and energy. At the time of writing, there is no clarity on what kind of penalties may be put on India, but it is the first time that a negotiated deal is directly tied to the Russian war in Ukraine. Otherwise, as of late July 2025, negotiations were ongoing, with a target date for a final agreement set for October 2025.
CANADA: The US and Canada, already partners under the USMCA, are renegotiating aspects of their trade relationship, with Trump threatening to impose tariffs up to 35% on Canadian goods unless a deal is reached. This negotiation primarily focuses on sectors like automobiles, metals, agriculture (particularly dairy), and digital services. Canada aims to preserve tariff-free access to the US market and secure stability in trade relations, while the US seeks to rebalance trade and address perceived issues of non-compliance with the USMCA (most goods protected under USMCA are understood to remain protected and not become subject of higher tariffs). A significant challenge is balancing Trump’s protectionist demands with the desire to maintain strong trade ties and avoid economic disruptions in key sectors like autos and energy. The talks are expected to continue through 2025, with a potential resolution tied to the 2026 USMCA review.
BRAZIL: The US–Brazil trade negotiations have reached a critical impasse following the Trump administration’s decision to impose steep tariffs on Brazilian imports. Initially sparked by a 10% tariff in April 2025 under Section 301, the situation escalated sharply in July when President Trump announced a 50% tariff on most Brazilian exports, citing the prosecution of former President Jair Bolsonaro as a motivating factor. Despite Brazil’s repeated diplomatic overtures – including a formal proposal in May and multiple high-level communications – the US has not responded substantively. Washington’s key interests include protecting politically aligned actors, reducing dependence on non-strategic suppliers, and securing preferential access to Brazilian commodities like copper, which is vital for US defence and energy industries.
Brazil, by contrast, seeks to preserve judicial independence, defend its sovereign legal processes, and maintain open access to the US market for its agricultural and industrial exports. While some sectors like aircraft and energy have been exempted, the broader tariff package is set to take effect on August 6, with no agreement in sight. The episode marks a serious deterioration in US – Brazil relations, blending trade retaliation with political pressure in an increasingly tense geopolitical climate.
MEXICO: Mexico, a key USMCA partner, is facing the threat of 30% tariffs on its exports unless it agrees to US demands regarding intellectual property, energy policies, and trade practices. The US has focused on pressing Mexico to strengthen intellectual property protections and allow greater access to its energy markets for US firms. Mexico, in turn, is looking to avoid the crippling tariffs, which would devastate its export-driven economy. Negotiations were ongoing with potential interim agreements expected as the August 1 deadline loomed. Both countries are working to address longstanding issues such as labour rights, agricultural trade, and energy reforms, with the ultimate goal of stabilising the trade relationship and preventing a trade war.
SOUTH KOREA: South Korea is negotiating with the US to prevent the imposition of 25% tariffs on its goods. The ongoing talks are focused on several sectors, including shipbuilding, automobiles, steel, electronics, and agriculture. South Korea is seeking to secure a tariff rate similar to Japan’s (15%), while also addressing issues like digital trade and non-tariff barriers. A key goal for the US is to strengthen economic cooperation in critical industries, particularly in shipbuilding and semiconductors, while South Korea aims to preserve its competitive position in the US market and avoid significant economic damage. A framework deal with pending negotiations on particular details and sectors is expected in August.
CHINA: The US and China are engaged in extended trade talks, with the threat of 30% tariffs on Chinese goods looming. The US seeks to reduce its massive trade deficit with China, secure better intellectual property protections, and address issues like technology transfer and market access. For China, the objective is to prevent further escalation of tariffs and secure relief from the punitive measures. Both countries are negotiating a deal that will balance economic interests with broader geopolitical concerns, particularly in technology and supply chains. The deadline for a deal was set for August 12, 2025, though ongoing talks suggest the timeline may be extended into late 2025 or 2026. Some of the deal discussions will likely tie into the support China has had for Russian war in Ukraine. However, the major challenge for this deal remains ensuring compliance with any agreed-upon terms, especially in sectors like semiconductors and rare earth materials.
TAIWAN, CHINA: The US and Taiwan are negotiating to avoid the 32% tariff that Trump announced on Taiwanese imports, particularly impacting semiconductors and electronics. Taiwan aims to secure a favourable trade deal that deepens its economic ties with the US and provides market access for its key exports. For the US, the goal is to ensure a stable supply of critical semiconductors and reduce the trade deficit with Taiwan. The talks are likely to focus on market access, IP protection, and supply chain cooperation, with a specific focus on Taiwan’s semiconductor industry. The geopolitical sensitivity of Taiwan’s status means the trade agreement will likely remain informal, with efforts to avoid provoking China while securing mutual economic benefits. Talks are ongoing, with a potential deal to be formalized by late 2025.
A common feature across all the trade deals that the US has started discussing and negotiating is that they are still in the framework stage. This means that while broad agreements and terms have been outlined, many of the specific details are still being worked out. These deals are essentially laying down the foundation for future negotiations, which will further define the exact terms, tariffs, sectoral commitments, and enforcement mechanisms.
As the discussions continue, these frameworks are expected to evolve and adapt, with the final agreements taking shape through ongoing dialogues. Therefore, while progress is being made, the outcomes remain fluid, and key aspects will be refined in the coming months as the involved parties seek to address remaining issues and align their national interests.
Impact on Foreign Direct Investment (FDI) flows
Many of these trade deals explicitly encourage US-bound investment. These commitments signal a clear trend: current US economic policy is increasingly favouring foreign multinationals that are accelerating plans to establish production capacity in the US to “build where you sell.” Higher US tariffs are incentivising companies to produce within the American market rather than exporting from abroad.
This shift is expected to drive increased foreign direct investment in US manufacturing, particularly in sectors like autos, batteries, and semiconductors – industries targeted by tariffs and bolstered by US industrial policies such as subsidies from the 2022 CHIPS Act and the Inflation Reduction Act. While various sectors are seeing this influx of investment, certain industries highlight the focus of US policy on strengthening its critical infrastructure using foreign direct investment. For example, shipbuilding could become an FDI beneficiary, as South Korea’s proposed partnership may lead to Korean shipyards investing in US facilities, injecting foreign capital and expertise into the sector. Similarly, aerospace and defence companies from the UK and EU may increase investments in US production to comply with “Buy American” requirements and avoid tariffs on aircraft and steel/aluminium
The new trade environment is accelerating the shift of capital away from China to more favourable locations. With steep US tariffs on Chinese goods looming, companies are avoiding new investments in China for export production and redirecting FDI to countries with better trade terms or directly to the US Southeast Asian nations, like Vietnam and Indonesia, are becoming attractive for supply chains feeding the US due to lower tariffs or duty-free access.
India could also see a surge in US FDI if its trade deal is finalised by October. In contrast, investment in China is likely to decline as tariffs and US policies restrict capital flows, while China’s focus on self-reliance and domestic market growth reduces incoming FDI. Western firms may invest in China for domestic markets but will move export-oriented investments to friendlier countries.
Countries that secure trade deals with the US are becoming key destinations for both US and third-country investments, driven by the friend-shoring trend. For example, despite ongoing friction, Mexico and Canada remain vital for US supply chains, attracting investment from Asia and Europe to serve the US tariff-free under USMCA, provided they navigate new rules from current talks. While uncertainties in US-Canada/Mexico negotiations may temporarily dampen FDI in North America, once settled, North America’s integrated supply chains and proximity will continue to make it an attractive bloc. Southeast Asia (Vietnam, Indonesia, Thailand, Philippines, Malaysia) will continue to benefit from relatively low labour costs and improved US market access, drawing significant FDI.
In contrast, Europe may adopt a more defensive FDI stance: European firms may increase investments in the US, but US and foreign firms might pause investments in Europe if trade remains burdened by a baseline 15% tariff, opting instead to invest in the US to access both markets. However, the EU’s strategy could involve diversifying outward investment to regions like Latin America, India or ASEAN, where new deals are in place. Taiwan, facing increased geopolitical and tariff risks, is incentivised to invest in the US, exemplified by TSMC’s US fab investment.
South Korea and Japan, having secured favourable terms, are also ramping up investments in the US across sectors like batteries, semiconductors, and vehicle assembly, aligning with both market and alliance priorities. At the same time, with many allied countries eliminating tariffs on US exports – such as the UK, EU (on some items), Indonesia, Vietnam and others – all agreeing to zero tariffs for US goods, it would become easier for US firms to export directly from the US rather than invest abroad to bypass trade barriers. However, it all depends on the sector and the product traded. This is why some US outward FDI will still flow into these allied countries to build supply chain components and take advantage of favourable rules of origin under new trade agreements.
At the same time, this redesign of global investment flows and supply chains will take into account existing dependencies. Transition periods will vary depending on the criticality of certain resources from non-allied partners or how secure it is to shift supply chains. Countries with critical resources or established, secure supply chains that are not yet part of the trusted network may present challenges in adjusting, requiring careful balancing between economic interests and geopolitical security. This transition will likely involve phased shifts, with investments in alternative sources or partners increasing over time as companies assess both the risks and the feasibility of switching supply chain routes. The overarching trend in the western world (or the non-Global South world) is a rebalancing of FDI flows toward the US and its allies, moving away from China-centric networks, and reinforcing the broader strategy of “de-risking” from adversaries while building industrial capacity among trusted partners.
The reconfiguration of global supply chains in critical sectors
More importantly, the new trade landscape – tariffs on adversaries, deals with allies – is driving a profound reconfiguration of supply chains, especially in semiconductors, green tech, pharmaceuticals, and rare earth/critical minerals … and green tech.
Supply chains for green technologies – particularly electric vehicle batteries, solar panels, and wind turbines – are, in theory, if all deals keep an US-centric approach, shifting toward North America and allied nations to reduce reliance on China, which dominates the battery and solar industries.
Over time, these changes will diversify clean tech supply chains for the US, with mining occurring in allied countries, processing either domestically or in allied regions, and assembly in the US or allied hubs. This shift breaks the previously China-centric supply chain. The EU is aiming to achieve similar goals. If the ongoing negotiations from the framework deal concluded on July 27 continue to define areas of collaboration, the new clean tech supply chain network could be largely driven by US-EU coordination.
Two distinct yet interconnected global supply networks
While the transformations and effects of new trade deals between the US and third countries will clearly shape the global system, these changes will unfold in stages, with a focus on the short and medium-term impacts. Right now, we are witnessing the early signs of “destructuring” in the short term, where existing supply chains are being fragmented or rerouted due to tariff changes and geopolitical tensions. However, as companies adapt and implement their own coping mechanisms, clear patterns of reorganisation are beginning to emerge. These patterns reflect the emerging trend of bifurcation and regionalisation of supply chains across various sectors.
In particular, the overarching trend is that countries aligned with the US are forming a more integrated, secure network for trade, while nations in the China-centric bloc are reinforcing their own supply chains, prioritising self-reliance and alternative markets. Over time, as businesses stabilise their operations in response to these shifts, the short-term disruptions will give way to more resilient, strategic supply chains tailored to their changing risk environments. This dynamic process will significantly reshape global trade flows, with the alignment of both policy and investment decisions playing a critical role in how these new supply networks take form.
A US-centric network of allies is emerging, including North America, Europe, developed Asia, and emerging economies like Vietnam, India, and Indonesia. Given the goals outlined in current negotiations, it’s likely that these countries will trade more freely with each other under new bilateral agreements and common standards, further reducing their reliance on China. This network is centred on security and resilience, with redundant capacity built across multiple regions, such as fab plants and EV battery factories outside of China, to mitigate risks. Supply chains within this network will prioritise security, with critical inputs sourced from multiple allies and key minerals stockpiled or sourced from friendly nations. This trend is actively shaping the future of manufacturing and resource extraction, as companies seek to minimise exposure to geopolitical volatility and tariff risks.
Meanwhile, a China-centric network is deepening its trade with nations not aligned with the US, such as Russia and Belt and Road Initiative partners, while focusing on self-reliance. China is diversifying its trade routes, strengthening ties with the Global South, reducing dollar dependence, and investing heavily in domestic tech R&D. Evidence of this shift includes China courting markets in ASEAN, Africa, and Latin America, and fostering indigenous innovation in key sectors like chips and batteries to break western control. This strategy may lead to parallel supply chains, with China focusing on local EV supply chains using domestic inputs for developing countries, while western supply chains use non-Chinese materials for markets in the US and EU. As a result, we’re seeing a reorganisation of global supply networks into two distinct, yet interconnected, blocs, each with its own set of trade relationships and dependencies.
While complete disentanglement is challenging and some neutral players may trade with both blocs, these trade deals are accelerating the re-routing of supply chains to prioritise security, with goods critical to national security or economic stability sourced from the US and its allies rather than strategic rivals.
As the US negotiates new trade deals, it is also applying cautious pressure on Russia, a strategy that is causing tension within its own alliances. The EU is frustrated by the US’s hesitancy to push Russia more aggressively, as European nations are closer to the conflict and have faced direct consequences of Russia’s actions. On the other hand, China is displeased by the US’s strategic manoeuvring, viewing it as a broader effort to reshape the Eurasian power play and even reduce Beijing’s influence in global affairs. These trade negotiations are intricately linked to the ongoing war in Ukraine, with the fate of the conflict and the future of the region intertwined with how the global system reconfigures. The longer-term geopolitical challenges – such as ensuring peace in Ukraine and the eventual reconstruction of both Ukraine and potentially Russia and its role in the global economy – will be shaped by the outcomes of these deals. The future of the global order, including how nations approach economic cooperation and security, will significantly impact the ability to manage these complex post-war realities.
In summary, global supply chains are becoming more segmented and alliance-focused. Critical sectors are seeing production clusters within friendly nations, ensuring continuity amid tariffs and geopolitical risks. Efficiency and cost considerations, which once favoured production in China, are now being tempered by tariff costs and geopolitical instability, pushing firms to “China-proof” their networks. As these trade deals and tariffs take full effect, we can expect a world where products consumed in the US are increasingly designed and built with components sourced from allied nations, with minimal reliance on China or other strategic rivals. This marks a significant reshaping of the global supply chain map, prioritising security and predictability over efficiency in an increasingly volatile geopolitical environment.
BOXOUT: Global Economic Implications of Ukraine Peace Talks*
The global economic impact of current ceasefire or peace negotiations in Ukraine remains limited. Restructuring was underway well before the war: the U.S. debated decoupling from China, the EU emphasized de-risking, and Russia sought to pivot away from Europe prior to 2020, with the pandemic accelerating these shifts. The war has reinforced, rather than created, these dynamics. U.S. trade policy, always linked to security objectives, now plays an even more visible role as Washington aligns trade with broader strategic and security priorities.
Key implications:
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Risks if talks fail: A collapse of negotiations and renewed Russian offensives could prompt U.S. secondary sanctions on China, stalling trade talks despite Washington’s long-term interest in stable ties with Beijing. India, under U.S. pressure for its relations with Russia, could nonetheless gain renewed importance as Washington seeks partners to balance China.
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Global economic warfare: Since 2022, Russia has disrupted Black Sea shipping, reshaping global shipping and insurance markets. These changes—and the parallel drive to build alternative trade routes, alliances, and corridors—are likely permanent, ensuring continued economic competition with the West regardless of any peace deal.
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Postwar adjustments: Even if a settlement is reached, Russia–West trade would resume only gradually and depend on the condition of Russia’s economy. Ukraine’s reconstruction will unfold in stages and remain closely tied to domestic conflict management and political stability.
For further perspectives on these developments, refer to the work of Dr. Antonia Colibasanu.
Dr. Antonia Colibășanu is an author and international speaker on geopolitical risk, advising global businesses on the strategic implications of shifting political and economic dynamics. She is Senior Geopolitical Analyst with Geopolitical Futures, Senior Fellow in the Eurasia Program at the Foreign Policy Research Institute, and Co-Founder and Principal at Allonia Group. Her latest book, Geopolitics, Geoeconomics and Borderlands, examines the crises shaping Europe’s periphery in the wake of the Covid-19 pandemic and the war in Ukraine. She is also the author of 2022 – the Geoeconomic Roundabout and Contemporary Geopolitics and Geoeconomics 2.0, focused on the intersection of economics, politics, and stability. Dr. Colibasanu also teaches geopolitics and geoeconomics at the Romanian National University of Political Studies and Public Administration and is an Associate Senior Expert with the New Strategy Center.
*At the time of publishing
