Trump Trade War: How Tariffs Reshaped U.S. Business and Global Trade

Trump’s trade war has started a significant shift in the global economy. What began as a tariff dispute has now reshaped how companies think about risk, resilience, and geography. Companies are no longer just looking for the cheapest options; they must now contend with political risks, financial challenges, and shifting customer needs.

Behind the scenes, even more significant changes are underway. Supply chains are fragmenting, new funding models are emerging, and legal issues are becoming integral to business strategy. This article examines how tariffs are prompting U.S. firms to reassess their operations, while also revealing new vulnerabilities in the global economy.

Supply Chains Realign as China Loses Share

The tariffs that were imposed have transformed global supply chains. The share of U.S. supplier volume from China, Hong Kong, and Korea has dropped from 90% to 50% over the past decade. This shift began during the first wave of tariffs in 2018 and has continued to accelerate since then.

Moreover, Vietnam, Indonesia, Thailand, and India have emerged as the biggest winners. These countries now manage a growing share of U.S.-bound production. According to Wells Fargo, supplier diversification is now evenly split between North Asia and South Asia. Mid-size manufacturers have steadily shifted their operations to Southeast Asia.

On the other hand, imports from China to the U.S. are down 26% year-over-year. Meanwhile, China’s trade with Indonesia has increased by 29.2%, while Vietnam’s has risen 23% and India’s by 19.4%. In contrast, U.S. imports from Vietnam have also grown, increasing 23% this year.

U.S. Companies Grapple With Higher Tariff Costs

Trump’s tariffs are putting significant pressure on U.S. companies. Many firms that frontloaded inventory in early 2025 are now running low. As new tariffs take effect, importers are facing rising costs and tighter cash flow.

HSBC reports a surge in demand for trade financing. The average tariff has increased from 1.5% to double digits. Sectors such as retail and generic pharmaceuticals are particularly vulnerable due to their thin margins. As a result, companies are renegotiating payment terms and increasing their working capital requirements.

More than 70% of U.S. businesses surveyed by HSBC reported that their cash needs have increased compared to last year. Moreover, the financing tools, such as HSBC’s Trade Pay platform, are seeing increased use. Since the rollout of new tariffs in April, financing activity has increased by 20%. As inventory buffers deplete, the need for capital will continue to grow.

Economic Indicators Flash Warning Signs

Tariffs are impacting not only supply chains but also the broader economy. The chart below shows that heavy truck sales dropped significantly to levels typically associated with a recession. Moreover, the three-month moving average has also fallen sharply.

Moreover, consumer conditions are worsening. The University of Michigan’s current economic conditions index has dropped to its lowest level since 1960. Liquidity is also tightening, as Bitcoin (BTC) plunged last week, signalling capital stress. However, while the pressure has eased, risks remain.

Meanwhile, stock markets remain elevated, with the S&P 500 continuing to set new record levels in 2025. The chart below shows that the forward P/E ratio of the S&P 500 is 23.21, significantly above the long-term average of 16.1.

These levels will be challenging to sustain unless liquidity improves. Extreme valuations, weakening demand, and rising financial strain all increase the risk of a market correction.

Conclusion: The Cost of Decoupling Is Just Beginning

The future of Trump’s tariffs now rests with the U.S. Supreme Court. Legal challenges are growing, and many companies are seeking refunds. However, the tariffs remain in place and continue to impact business operations.

A long-term shift away from China is already underway. Supply chains are being rebuilt across Southeast and South Asia. But in the near term, American firms are caught between rising costs, thinning inventories, and shrinking margins.

Liquidity is tightening, and working capital pressures are mounting. As companies struggle to manage these disruptions, the economic toll of the trade war is becoming more visible. Trump’s tariffs have reshaped the global business environment, and the ripple effects are far from over.