Trade tensions and tariffs remain a major brake on the global economy
And while in recent days there has once again been talk of a possible meeting between U.S. President Donald Trump and Chinese President Xi Jinping, global economies, industry, and financial markets continue to live with the very concrete consequences of years of tariffs, trade disputes, and ever-wider uncertainty about the rules of international exchange. For companies planning investments, for exporters seeking new markets, and for investors trying to assess future production costs, the problem is no longer just the level of a particular tariff, but the fact that trade rules can change very quickly, often by political decision and without a long transition period. In such an environment, the business sector becomes more cautious, and that caution slows investment, delays the expansion of production, and increases adjustment costs in supply chains. That is why trade policies today are almost as important a global topic as energy prices, inflation, or interest rates.
Although some international institutions published somewhat more moderate estimates of global growth at the beginning of 2026 than had been expected a few months earlier, the common message from almost all major sources remains the same: trade barriers and political uncertainty continue to represent a serious risk to growth. The International Monetary Fund estimates that the global economy should grow by 3.3 percent in 2026, but at the same time warns that the escalation of geopolitical tensions and changes in trade policies are among the main downside risks. The World Bank speaks of the resilience of the global economy, but also of the fact that the current period is marked by historically high trade policy uncertainty. The OECD, meanwhile, warns even more directly that greater trade barriers, weaker business and consumer confidence, and unpredictable political decisions could further restrain growth and increase inflationary pressures. In other words, growth still exists, but it is increasingly conditioned by economies’ ability to adapt to shocks, and less and less by stable rules of the game.
A signal of a possible meeting, but no real certainty for markets
The latest diplomatic signals between Washington and Beijing are therefore being watched with great attention. According to information published by international media at the beginning of March, U.S. and Chinese trade officials are expected to meet in Paris in mid-March, and that meeting is being interpreted as preparation for a possible meeting between Trump and Xi Jinping. The very fact that such a channel of communication is being maintained is important for the markets because it suggests that neither side wants a complete break in dialogue. However, for companies and investors this is still not a sufficient guarantee of stability. As a rule, the business sector does not react only to diplomatic photographs and announcements, but to concrete, implementable, and longer-term agreements on tariffs, market access, subsidies, technological restrictions, and procurement rules.
That is precisely why the very possibility of a meeting between the two leaders currently carries more symbolic than operational weight. Markets may briefly welcome a reduction in rhetorical tensions, but strategic uncertainty remains. In recent years, companies have repeatedly seen that the political tone between the world’s two largest economies can change in just a few weeks, and with it expectations regarding tariffs, technological restrictions, or export rules. For multinational companies, this means that business decisions cannot be made solely on the basis of optimistic announcements, but with built-in scenarios for sudden disruptions. Such an approach increases costs, slows decision-making, and in the long run reduces the willingness to make large investments.
Tariffs are no longer just a political tool, but a business cost
Behind the expression “trade tensions” lies a very concrete economic reality. When a country introduces a new tariff or threatens to do so, it is not only the governments conducting the dispute that are affected, but entire supply chains, from producers of raw materials and components to carriers, distributors, and end buyers. Companies then have to assess whether it is worthwhile to keep existing suppliers, move production to another country, build larger inventories in advance, or simply pass part of the cost on to customers. None of those options is free. All of them imply additional logistical, legal, and financial costs, and in many sectors also a loss of efficiency that has been built up over years through globalized production chains.
In its reviews for 2026, UNCTAD warns that tariffs are rising, that growing protectionism is increasing political and business uncertainty, and that value chains continue to be reshaped under the pressure of geopolitics. This is especially important for industries that depend on complex international supply networks, such as electronics, the automotive industry, energy, the chemical industry, and pharmaceuticals. In such sectors, a product is rarely made in one country from start to finish; much more often it is created through multiple successive phases in different countries. When tariffs or restrictions are introduced at one point along that path, the disruption is transmitted to the entire system. That is why today’s tariffs are not just a budgetary or geopolitical issue, but a direct item in the business calculations of thousands of companies.
Why investors seek predictability more than low tariffs
In public debates, the impression is often created that markets would be satisfied if tariffs were merely reduced. In practice, however, predictability is often just as important as the level of the trade burden itself. A company will sometimes cope more easily even with a higher cost if it knows that the rules will remain stable for several years than with a nominally lower burden that can change overnight. Investments in new factories, logistics centers, research and development, or long-term supply contracts are planned over periods of five, ten, or more years. When trade policy turns into a day-to-day political instrument, such plans become riskier and more expensive.
It is precisely at this point that the OECD particularly warns that elevated trade barriers and political uncertainty weaken business and consumer confidence and can weaken economic activity. When companies are not sure whether their goods will be burdened with additional tariffs in six months or whether a particular component will fall under export restrictions, they more often postpone decisions, cut costs, and hold cash. The consequence is not only slower trade growth, but also a weaker investment cycle. And when investment weakens, productivity grows more slowly, jobs are created more slowly, and inflationary shocks are harder to mitigate.
Supply chains are changing, but adaptation has limits
In recent years, some analysts have argued that the global economy will adapt relatively quickly to new tariffs through the rearrangement of production and trade flows. To a certain extent, this is indeed happening. The World Bank points out that growth in 2025 was supported by stronger trade ahead of policy changes and by the rapid adaptation of supply chains. But the same source also warns that these effects are temporary and should weaken in 2026 as trade and domestic demand slow. This means that earlier resilience should not mislead: companies have indeed found ways to redirect part of procurement and exports, but that adaptation is neither endless nor entirely painless.
Moving production to another country, seeking new suppliers, or creating parallel logistics channels requires time, capital, and legal certainty. In addition, many countries that are becoming alternative locations do not immediately have the infrastructure, skilled labor force, or regulatory stability needed to quickly replace existing production centers. That is why in practice companies are simultaneously diversifying supply and maintaining part of the old structure, which increases the complexity and cost of doing business. Such a hybrid model can reduce the risk of one major disruption, but it does not restore the old level of efficiency. In the end, the consequences are felt in prices, delivery times, and profit margins.
Global growth endures, but it is becoming increasingly vulnerable
The most important paradox of the current moment is that the global economy is still showing a certain degree of resilience, but at the same time it is becoming increasingly vulnerable to political decisions. The IMF projects growth of 3.3 percent for 2026, while the World Bank estimates global growth at 2.6 percent, and the UN review of world economic prospects speaks of 2.7 percent. The differences among the projections stem from methodology, coverage, and assumptions, but the common denominator is clear: no one is talking about a strong and carefree surge in the global economy. Instead, the discussion is about growth that endures despite pressures, not thanks to a stable international environment.
That is an important difference because it shows that current resilience is not the same as healthy, balanced, and predictable growth. In many cases it stems from technological investment, fiscal support, private-sector adjustments, and temporary trade redirections. If trade tensions intensify further or uncertainty persists for too long, such shock absorbers may weaken. The World Bank has already warned that the 2020s, if current trends continue, could be the weakest decade of global growth since the 1960s. That is a serious warning for governments that often treat trade policy as a short-term instrument of pressure, rather than as part of a broader system that affects investment, employment, and citizens’ living standards.
WTO and rules of the game that are functioning with increasing difficulty
In the background of the U.S.-China disputes there is also a broader crisis of the global trading system. More countries, including allies of the United States, have in recent months warned that the system is under severe pressure and that reforms of the World Trade Organization are needed. The problem is not only the level of certain tariffs, but the fact that there is increasing resort to unilateral measures, national subsidies, and security exceptions that bypass or weaken multilateral rules. When such practice becomes frequent, companies can no longer count on disputes being resolved quickly and predictably within the international system.
The WTO had already warned earlier that trade growth was weakening because of rising tariffs and trade uncertainty, and UNCTAD states in its 2026 review that the discussion on WTO reform is at a turning point. For smaller and medium-sized exporters, this is not an abstract institutional issue. They do not have the financial strength of large multinational companies to quickly relocate supply, open subsidiaries on multiple continents, or wage lengthy legal battles. That is why weaker and less predictable international rules hit hardest precisely those actors with the least room for maneuver. In such a balance of power, global trade becomes less open, and market competition less level.
Europe, Asia, and developing countries between adaptation and exposure
The consequences of prolonged trade tensions are not distributed equally. Large economies absorb shocks more easily because they have larger domestic markets, more fiscal space, and stronger industrial bases. Smaller open economies, as well as many developing countries, are considerably more exposed to changes in external demand, rising financing costs, and disruptions in the supply of energy, food, and industrial inputs. The UN review for 2026 warns that trade and investment are encountering ever-stronger obstacles, while high indebtedness and climate shocks further limit the room for maneuver of many countries. When tariffs and uncertainty are added to that, the space for development policy becomes even narrower.
Europe is in a sensitive position here. On the one hand, it is trying to strengthen its own industrial resilience, technological security, and strategic autonomy. On the other hand, it remains strongly dependent on exports, global supply chains, and stable rules of international exchange. For European manufacturers of cars, machinery, chemicals, and industrial equipment, it is especially important that the world’s largest markets do not enter a new spiral of tariffs and countermeasures. Asia, meanwhile, remains the center of global production, but precisely because of that it feels every major disruption in relations between Washington and Beijing most directly. Countries trying to profit as alternative production locations may gain some business in the short term, but in the long run they too remain hostages of general uncertainty.
What companies and markets are actually waiting for now
The most important question is not whether another meeting of senior U.S. and Chinese officials will happen soon, but whether measurable progress will follow those talks. Markets will look for signs that disputes will not spread further into new areas, that new punitive tariffs will not be introduced without long notice, and that the largest economies will at least partially return to a more predictable framework of trade relations. Companies will pay particular attention to whether they can plan procurement, investment, and production without a constant need for crisis scenarios. Investors will watch whether the risk of sudden disruptions in industry, logistics, and commodity prices will decrease.
For now, there is not enough such certainty. There is diplomatic space, there are signals that neither Washington nor Beijing wants a complete shutdown of communication, but that still does not mean that the period of trade shocks is behind us. In the global economy, already burdened by slower growth, high debt, and geopolitical tensions, every new tariff or threat of a disruption of the rules has a greater effect than it did ten years ago. That is why trade rules are no longer a narrow topic for specialized economic circles. They have become one of the key stories for industry, financial markets, and households, because their stability determines how much production will cost, how secure supply routes will be, and how much room the economy will have to grow without new upheavals.
Sources:- International Monetary Fund – January estimate of global growth and warnings about risks related to trade policies (link)- World Bank – overview of global economic prospects for 2026 with an emphasis on trade tensions and political uncertainty (link)- OECD – economic outlook and warnings about the effects of trade barriers, weaker confidence, and uncertainty on growth and inflation (link)- UN Trade and Development – overview of key trends in global trade for 2026, including the rise of protectionism and changes in value chains (link)- South China Morning Post / Bloomberg – information on the planned meeting of U.S. and Chinese trade officials as preparation for a possible meeting between Trump and Xi Jinping (link)
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