Tariffs are back, but this time there is
a war in the Persian Gulf and oil has hit $100 a barrel.
·
The
Trump administration has imposed new tariffs on imports from more than 80
countries, replacing the temporary tariffs that
expired after the Supreme Court struck down earlier measures.
·
Unlike
the previous rollout in April 2025, the latest tariffs come during the ongoing U.S.-Iran
war, making the global economic environment
significantly more fragile.
·
Global
crude oil prices have risen to around
$100 per barrel, compared with approximately $70
per barrel when the original tariffs were announced.
·
Higher
energy costs increase inflationary pressures and weaken global economic growth.
·
Analysts
believe that disruptions caused by the Iran conflict currently pose a greater
risk to the global economy than the new tariffs.
·
Rising
fuel costs are affecting production, transportation, and consumer prices across
major economies.
·
The
administration is using Section 301 of the Trade Act of 1974 to
impose tariffs, citing trading partners' failure to address forced
labour practices.
·
Additional
tariffs under separate investigations are expected.
·
Economists
suggest that businesses had already increased prices during the earlier tariff
rounds.
·
Since
many firms did not reduce prices after previous tariffs were struck down, the
latest measures are expected to have a relatively smaller inflationary impact.
·
Frequent
changes in tariff policy make long-term business planning difficult.
·
Companies
continue to face uncertainty in investment decisions, sourcing strategies, and
supply chain management.
·
Shipping
through the Strait of Hormuz and
the Red Sea
remains disrupted.
·
Escalation
by the Iran-backed Houthi movement has further threatened regional energy
supplies.
·
The
disruptions have pushed oil prices higher and increased volatility in financial
markets.
·
Higher
oil prices have led to:
o A sell-off in government bonds.
o Weakness in global equity markets.
o U.S. gasoline prices rising to around $4
per gallon.
o Higher mortgage interest rates.
·
Asian
economies are particularly vulnerable because they depend heavily on:
o Export markets.
o Imported energy.
·
The
combined impact of tariffs and higher fuel prices poses significant economic
challenges.
·
Several
Asian countries have negotiated trade arrangements with the United States.
·
Officials
indicate that the newly announced tariff rates are broadly consistent with
those negotiated previously.
·
Japan
pledged $550 billion in
U.S. investments in exchange for lower tariffs.
·
South
Korea committed substantial investments in
shipbuilding and battery manufacturing.
·
Taiwan
announced major investments to expand semiconductor production in the United
States.
·
Many
Asian economies have weathered tariff and energy shocks better than expected.
·
Businesses
have:
o Absorbed higher costs.
o Passed costs to consumers.
o Diversified supply chains.
·
Governments
have also introduced fuel subsidies and support measures.
·
Economies
linked to the artificial intelligence and semiconductor
industries have outperformed others.
·
South
Korea benefited from strong semiconductor exports despite weakness in
construction.
·
Countries
less integrated into AI supply chains have faced slower growth.
·
The
Philippines declared a national energy emergency in March.
·
Rising
fuel costs and limited participation in the AI-driven technology boom have
contributed to economic slowdown.
·
Economists
view the evolving U.S.–China trade relationship as the most significant aspect
of Trump's renewed trade policy.
·
Future
negotiations between Washington and Beijing will heavily influence global
trade.
·
China
is expected to use its dominance in rare
earth elements and permanent magnets as
leverage in trade negotiations.
·
These
materials are essential for U.S. technology, electric vehicles, and defense manufacturing.
·
Chinese
President Xi Jinping is
expected to visit Washington in September.
·
The
visit could influence the next phase of U.S.–China trade negotiations.
·
Analysts
believe China could ultimately face lower tariff rates than some neighboring countries if negotiations succeed.
·
This
would strengthen China's competitive position in global exports.
·
Despite
trade tensions, access to the U.S. market remains highly valuable.
·
Strong
American consumer spending continues to make the United States the world's most
attractive export destination.
While
President Trump's renewed tariffs add to global trade uncertainty, economists
increasingly view the Iran conflict, disrupted energy supplies,
and elevated oil prices as the dominant risks
to the global economy. The interaction of geopolitical tensions, energy
markets, and U.S.–China trade negotiations will largely determine the global
economic outlook in the coming months.
[ABS News Service/25.07.2026]
We’ve
all been down this road before.
President
Trump issues a blitz of punitive tariffs on allies and rivals, straining trade,
rattling bond markets, raising prices and injecting more uncertainty into the global
economy.
The
difference now is that the United States is at war with Iran, key trade and energy
routes in the Persian Gulf region are blocked and the global oil price is near $100
a barrel. When Mr. Trump unveiled his original cold blanket of tariffs, on April
2, 2025, oil had been around $70 a barrel.
“These
new trade tensions come at a moment in which the global economy, due to higher energy
prices, is in a weaker spot than on Liberation Day last year,” said Carsten Brzeski,
an economist at the Dutch multinational bank ING, referring to the day President
Trump announced the specific rates.
The
new import taxes on more than 80 countries, including members of the European Union,
are Mr. Trump’s latest bid to reimpose tariffs after the U.S. Supreme Court struck
down many of his previous levies in February.
The
tariffs, which use trading partners’ unfair labor practices
as a rationale, replace a similar, temporary set he imposed right after the court
ruling. More tariffs are expected to follow.
Mr.
Brzeski and other analysts said the economy had already absorbed much of the inflationary
impact of Mr. Trump’s trade war.
“The
worst of the tariff-related goods inflation is probably behind us,” said Carl Tannenbaum,
chief economist for Northern Trust, a global financial institution based in Chicago.
Companies raised prices last year and didn’t roll back those increases after the
Supreme Court’s decision.
Both
the tariffs and their erratic implementation tend to hamper long-term planning,
dent investment and drag down growth as businesses are forced to spend time and
resources figuring out how to adapt their production and supply chains.
Even
so, at the moment, the escalating war with Iran, which began five months ago with
attacks by the United States and Israel, is having a much greater impact on the
health of the global economy than tariffs are. In Japan, the government cabinet
office said on Friday that companies might be passing on increased costs caused
by the war in Iran at an ever faster pace than they did
after the Russian invasion of Ukraine in 2022, the last great global energy shock.
Key
energy trade routes in the Strait of Hormuz and the Red Sea continue to be disrupted.
Oil prices jumped again this week, as the Iranian-backed Houthi militia group in
Yemen escalated its confrontation with Saudi Arabia and opened a second front in
the region’s conflict.
The
spike in oil prices sent jitters through the market, leading to a sell-off of government
bonds and weighing down stocks. In the United States, gas prices hit $4 a gallon
and mortgage rates ticked up.
“The
situation in the Middle East is to me, and from what I can see from the data, very
much more worrying for the global economy than this fireworks of tariffs,” said
Paola Subacchi, a professor at Sciences Po, Paris. On the trade front, she said,
“it’s more or less the same story.”
Perhaps
no region in the world has been hit harder by the double whammy of tariffs and the
war than Asia, where economies are heavily reliant on both exports and imported
energy.
Several
major Asian countries have already negotiated aggressively to secure trade agreements
with Washington. It’s not yet entirely clear how the new tariffs imposed by Mr.
Trump will affect those deals, but representatives from several foreign governments
said they had privately been told that tariff rates would be the same as those negotiated
last year.
Japan
promised $550 billion in American investments as part of a trade deal in exchange
for a reduced tariff rate of 15 percent. South Korea has similarly committed tens
of billions of dollars toward shipbuilding and battery manufacturing, while Taiwan
has promised tens of billions to expand advanced semiconductor production.
So
far, economies in Asia have performed better than expected. “The biggest takeaway
for me has been how resilient these economies have been to all these shocks,” said
Sonal Varma, an economist at Nomura, Japan’s largest investment bank and brokerage
firm.
Companies
have either absorbed costs, passed them on to consumers or rerouted shipments through
other countries. And since the Iran war, despite shortages, governments have offered
supplies and subsidies to help businesses and consumers deal with rising fuel prices.
Yet
even as the bigger picture has been more positive than expected, there are divergences
across the region.
Countries
participating in the boom in artificial intelligence, through semiconductors, data
centers or other parts of the ecosystem, have fared better
than those that are more exposed to energy shocks.
The
Philippines, which declared a national energy emergency in March and has continued
to grapple with rising fuel prices, has been left behind in the A.I. boom and is
experiencing an economic slowdown.
By
contrast, an increase in semiconductor exports helped South Korea’s economy grow
faster than expected this spring, offsetting declines in other sectors like construction.
How
negotiations play out between the United States and China is perhaps the most important
arena in Mr. Trump’s renewed trade wars.
“The
main event in all of this is U.S. v. China,” said Mr. Tannenbaum at Northern Trust.
“China
has shown itself to be a very formidable trade bargainer,”
he said. “They have been preparing for this for a long time, and they know exactly
where our vulnerabilities are.”
Xi
Jinping, China’s leader, is planning a state visit to Washington in September. And
he has already shown his willingness to withhold minerals that are critical to America’s
tech and defense industries to pressure the Trump administration
on trade.
Mary
E. Lovely, senior fellow at the Peterson Institute for International Economics,
recently met with Chinese analysts as part of a regular exchange program. She said
China’s leaders “are very confident that their chokehold on permanent magnets and
rare earths will prevent President Trump from really going much higher than where
he already is” on tariff levels.
That
could mean China ends up with lower tariffs than some of its neighbors, giving it an economic edge over competitors.
The
prize — easier access to the gigantic American market — is more valuable than ever.
American consumers have an enormous appetite for goods and have increased their
spending at a faster pace than those in Europe or in China.